Rambus'S Proposed Post-Trial Findings of Fact and Conclusions of Law With Respect To Samsung'S Counts I-Iii and Estoppel Defense

Case 5:05-cv-00334-RMW Document 2360 Filed 10/08/2008 Page 1 of 112
1 GREGORY P. STONE (#78329)

KEITH HAMILTON (#252115)
2 MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, 35th Floor
3 Los Angeles, CA 90071-1560
Telephone: (213) 683-9100
4 Facsimile: (213) 687-3702
E-mail: gregory.stone@mto.com;
5 keith.hamilton@mto.com
6 BURTON A. GROSS (#166285)
CAROLYN HOECKER LUEDTKE (#207976)
7 MIRIAM KIM (#238230)
MUNGER, TOLLES & OLSON LLP
8 560 Mission Street, 27th Floor
San Francisco, CA 94105-2907
9 Telephone: (415) 512-4000
Facsimile: (415) 512-4077
10 E-mail: burton.gross@mto.com; carolyn.luedtke@mto.com;
miriam.kim@mto.com
11
12 Attorneys for Plaintiff and Counterclaim-Defendant

RAMBUS INC.
13
UNITED STATES DISTRICT COURT
14 NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION
15
RAMBUS INC., CASE NO.: C 05-00334 RMW
16
Plaintiff,
17 RAMBUS’S PROPOSED POST-TRIAL
FINDINGS OF FACT AND CONCLUSIONS
vs.
18 OF LAW WITH RESPECT TO SAMSUNG’S
COUNTS I-III AND ESTOPPEL DEFENSE
HYNIX SEMICONDUCTOR INC., et al.,
19
Judge: Hon. Ronald M. Whyte
Defendants.
20 Trial Date: September 22, 2008
21 PUBLIC REDACTED VERSION
22
RAMBUS INC., CASE NO.: C 05-02298 RMW
23 Plaintiff,
24 vs.
25 SAMSUNG ELECTRONICS CO., LTD., et

al.,
26
Defendants.
27
28
RAMBUS’ PROPOSED POST-TRIAL FINDINGS OF
FACT AND CONCLUSIONS OF LAW
6088127.1 C 05-00334, 05-02298 RMW
1 TABLE OF CONTENTS
2 Page(s)
3 PROPOSED FINDINGS OF FACT ............................................................................................... 1

A. Background Facts and Procedural History.............................................................. 1
4
B. Rambus and Samsung Negotiated an RDRAM Technology License and
5 Amendment ............................................................................................................. 4
C. The SDR/DDR License Agreement ........................................................................ 7
6
1. Background ................................................................................................. 7
7 2. Section 1.7: The Scope of “Licensed Products” Under the
SDR/DDR License...................................................................................... 9
8
3. Section 3.8: The Most Favored Licensee Clause ...................................... 29
9 4. Section 8.5: The Duty to Negotiate in Good Faith................................... 42
10 D. Samsung Was in Breach Of The SDR/DDR License Because It Failed To
Comply With Its Royalty Audit Obligations ........................................................ 51
11 E. Rambus’s Good Faith Renewal Negotiations in 2004 and 2005 .......................... 56
12 1. Renewal Negotiations Began in 2004 ....................................................... 56
2. Rambus’s February 20, 2005 Renewal Offer............................................ 57
13
3. Samsung Learned The Terms of the Infineon Settlement Agreement...... 58
14 4. Rambus Continued Renewal Negotiations In Good Faith After the
Infineon Settlement Agreement ................................................................ 60
15
F. Samsung Destroyed Relevant and Material Evidence .......................................... 66
16 PROPOSED CONCLUSIONS OF LAW ..................................................................................... 68
17 A. Samsung’s Claims And Burden Of Proof ............................................................. 68
B. Applicable Principles of Contract Interpretation .................................................. 69
18
C. Count I: Breach of Section 3.8.............................................................................. 71
19 1. Section 3.8 Does Not Require Rambus To Adjust Samsung’s
Royalty Rates Based On That Agreement. ............................................... 72
20
2. The Extrinsic Evidence Indicates That The Parties Did Not Intend
21 Section 3.8 To Reach Lump Sum Settlement Payments........................... 75
D. Count II: Breach of Section 8.5 ............................................................................ 78
22
1. Rambus Did Not Breach Section 8.5. ....................................................... 78
23 2. Samsung’s Breach Of The SDR/DDR License Released Rambus
From Any Renegotiation Obligation Otherwise Required Under
24 Section 8.5................................................................................................. 86
25 3. No Damages Are Available for Rambus’s Alleged Breach...................... 88
E. Count III: Breach of the Implied Duty of Good Faith and Fair Dealing............... 94
26
1. Section 3.8................................................................................................. 94
27 2. Section 8.5................................................................................................. 96
28 F. Samsung’s Affirmative Defense of Estoppel........................................................ 97
RAMBUS’ PROPOSED POST-TRIAL FINDINGS OF FACT
AND CONCLUSIONS OF LAW
-i- C 05-00334, 05-02298 RMW
1 TABLE OF CONTENTS
Page(s)
2
3 1. Samsung Failed To Plead Its Estoppel Defense........................................ 97

2. Samsung’s Estoppel Defense Fails As A Matter Of Law ......................... 98
4
3. Samsung Failed To Satisfy Its Burden of Proof On Its Estoppel
5 Defense.................................................................................................... 102
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6079319 -ii- C 05-00334, 05-02298 RMW
1 TABLE OF AUTHORITIES
Page(s)
2
3 FEDERAL CASES
4 A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group,

873 F.2d 155 (7th Cir. 1989)............................................................................................... 86
5 All-Tech Telecom, Inc. v. Amway Corp.,
174 F.3d 862 (7th Cir. 1999)............................................................................................. 102
6
Altera Corp. v. Clear Logic, Inc.,
7 424 F.3d 1079 (9th Cir. 2005)............................................................................................. 69
Atl. Mut. Ins. Co. v. Metron Eng’ g & Constr. Co.,
8 83 F.3d 897 (7th Cir. 1996)............................................................................................71, 99
9 Cardinal of Adrian Inc. v. Amerock Corp.,
1979 WL 24997 (E.D. Mich. Aug. 22, 1979) ...................................................................... 74
10 Darling Int’ l Inc. v. Baywood Partners, Inc.,
No. C-05-3758 EMC, 2007 WL 2904034 (N.D. Cal. Oct. 2, 2007) ..................................... 99
11
Employers Ins. of Wausau v. Granite State Ins. Co.,
12 330 F.3d 1214 (9th Cir. 2003)............................................................................................. 71
Grynberg v. FERC,
13 71 F.3d 413 (D.C. Cir. 1995) .........................................................................................71, 99
14 Harley C. Loney Co. v. Mills,
205 F.2d 219 (7th Cir. 1953)............................................................................................... 74
15 Hazeltine Corp. v. Zenith Radio Corp.,
100 F.2d 10 (7th Cir. 1938)................................................................................................. 74
16
Iconix, Inc. v. Tokuda,
17 457 F. Supp. 2d 969 (N.D. Cal. 2006) ............................................................................... 101
Phoenix Mut. Life Ins. Co. v. Shady Grove Plaza Ltd. Partnership,
18 734 F. Supp. 1181 (D. Md. 1990)........................................................................................ 86
19 Rose v. M/V “Gulf Stream Falcon,”
186 F.3d 1345 (11th Cir. 1999)......................................................................................71, 99
20 Scottsdale Ins. Co. v. OU Interests, Inc.,
No. C 05-313 VRW, 2005 WL 2893865 (N.D. Cal. Nov. 2, 2005)...................................... 71
21
Stanley v. Univ. of So. Calif.,
22 178 F.3d 1069 (9th Cir. 1999)............................................................................................. 82
Sun Pacific Farming Co-op., Inc. v. Sun World Int'l Inc.,
23 2006 WL 1716206 (E.D. Cal. 2006).................................................................................... 69
24 Texas Instruments v. Cypress Semiconductor Corp.,
90 F.3d 1558 (Fed. Cir. 1996)........................................................................................... 102
25 Venture Assocs. Corp. v. Zenith Data Sys. Corp.,
96 F.3d 275 (7th Cir. 1996)................................................................................................. 90
26
Vestar Dev. II, LLC v. Gen. Dynamics Corp.,
27 249 F.3d 958 (9th Cir. 2001)..........................................................................................89, 93
Walker v. KFC Corp.,
28 728 F.2d 1215 (9th Cir. 1984)........................................................................................... 101
RAMBUS’PROPOSED POST-TRIAL FINDINGS OF
6079319 -ii- C 05-00334, 05-02298 RMW
Page(s)
2
3
STATE CASES
4
A.S.D. v. W. Mun. Water Dist. of Riverside County,
5 2002 WL 31820335 (Cal. Ct. App. 4th Dist. Dec. 17, 2002) ..........................................71, 99
6 Ablett v. Clauson,
43 Cal. 2d 280 (1954) ....................................................................................................91, 93
7 Aguilar v. Atlantic Richfield Co.,
25 Cal. 4th 826 (2000) ........................................................................................................ 68
8
Anza Parking Corp. v. City of Burlingame,
9 195 Cal. App. 3d 855 (1987)............................................................................................... 68
Auerbach v. Great Western Bank,
10 74 Cal. App. 4th 1172 (1999).........................................................................................86, 92
11 Autry v. Republic Prods., Inc.,
30 Cal. 2d 144 (1947) ....................................................................................................91, 93
12 Balfour, Guthrie & Co. v. Gourmet Farms,
108 Cal. App. 3d 181 (1980)............................................................................................... 94
13
Beck v. Am. Health Group Int’ l, Inc.,
14 211 Cal. App. 3d 1555 (1989)........................................................................................91, 93
Buss v. Superior Court,
15 16 Cal. 4th 35 (1997) .......................................................................................................... 68
16 Carma Developers (Cal.), Inc. v. Marathon Development California, Inc.,
2 Cal. 4th 342 (1992) .......................................................................................................... 93
17 Casa Herrera, Inc. v. Beydoun,
32 Cal. 4th 336 (2004) ......................................................................................... 70, 100, 101
18
City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
19 68 Cal. App. 4th 445 (1998)................................................................................................ 87
Coachella Valley Water Dist. v. Imperial Irrigation Dist.,
20 2007 WL 2822766 (Cal. Ct. App. Oct. 1, 2007) .............................................................91, 92
21 Copeland v. Baskin Robbins U.S.A.,
96 Cal. App. 4th 1251 (2002)........................................................................................passim
22 Foley v. Interactive Data Corp.,
47 Cal. 3d 654 (1988) ......................................................................................................... 94
23
Gerdlund v. Electronic Dispensers Int’ l,
24 190 Cal. App. 3d 263 (1987)............................................................................................... 69
Guz v. Bechtel Nat’ l, Inc.,
25 24 Cal. 4th 317 (2000) ...................................................................................................95, 96
26 Haggard v. Kimberly Quality Care, Inc.,
39 Cal. App. 4th 508 (1995)................................................................................................ 82
27 Indian Ridge Crest Gardens v. City of Rancho Palos Verdes,
2006 WL 3462106 (Cal. Ct. App. Dec. 1, 2006) ............................................................90, 91
28
6079319 -iii- C 05-00334, 05-02298 RMW
Page(s)
2
3 International Ass’ n of Fire Fighters v. City of San Leandro,

181 Cal. App. 3d 179 (1986)............................................................................................... 68
4 Love v. Fire Ins. Exchange,
221 Cal. App. 3d 1136 (1990)........................................................................................94, 95
5
Maranatha Temple, Inc. v. Enterprise Prods. Co.,
6 893 S.W. 2d 92 (Tex. App. Houston 1st Dist. 1994).......................................................... 102
Martinez v. Scott Specialty Gases, Inc.,
7 83 Cal. App. 4th 1236 (2000)............................................................................................ 102
8 McDonough v. Chu Chew Shong,
21 Cal. App. 2d 257 (1937)............................................................................................70, 99
9 Newman v. Albert,
170 Cal. App. 2d 678 (1959)............................................................................................... 68
10
Old Republic Ins. Co. v. FSR Brokerage, Inc.,
11 80 Cal. App. 4th 666 (2000)................................................................................................ 94
Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co.,
12 69 Cal. 2d 33 (1968) ............................................................................................ 69, 100, 103
13 Pasadena Live v. City of Pasadena,
114 Cal. App. 4th 1089 (2004)............................................................................................ 95
14 Patwardhan v. Kale,
2003 WL 21130236 (Cal. Ct. App. 4th Dist. May 16, 2003).....................................70, 71, 99
15
People v. Goodloe,
16 37 Cal. App. 4th 485 (1995)................................................................................................ 70
Powerine Oil Co., Inc. v. Superior Court,
17 37 Cal. 4th 377 (2005) ........................................................................................................ 69
18 Smith v. County of Santa Barbara,
203 Cal. App. 3d 1415 (1988)........................................................................................97, 98
19 State Compensation Ins. Fund v. WCAB,
40 Cal. 3d 5 (1985) ......................................................................................................68, 103
20
Waller v. Truck Ins. Exchange, Inc.,
21 11 Cal. 4th 1 (1995) ............................................................................................................ 94
Wells Fargo Bank v. Bank of America,
22 32 Cal. App. 4th 424 (1995)...................................................................................68, 69, 102
23 Wood v. Blaney,
107 Cal. 291 (1895) .......................................................................................................... 102
24
25 STATUTES AND RULES
26 Cal. Bus. & Prof. Code § 17200.............................................................................................. 2, 3

Cal. Civ. Code § 1625 .............................................................................................................. 70
27
Cal. Civ. Code § 1638 .............................................................................................................. 25
28 Cal. Civ. Code § 1639 .............................................................................................................. 69
6079319 -iv- C 05-00334, 05-02298 RMW
Page(s)
2
3 Cal. Civ. Code § 1641 .........................................................................................................25, 28

Cal. Civ. Code § 3301 .........................................................................................................90, 92
4
Cal. Code of Civ. Procedure § 1856.......................................................................................... 70
5 Cal. Evid. Code § 500............................................................................................................... 68
6 Cal. Evid. Code § 622............................................................................................................... 98
7
OTHER AUTHORITIES
8
2 Schwing, Cal. Affirmative Defenses, § 34.10 (2008 ed.)......................................................... 97
9 5 Wright & Miller, Fed. Practice & Proc., § 1274.................................................................... 97
10 1 Witkin, Summary of Cal. Law (2003 Supp.) Contracts, § 743................................................ 95
17A C.J.S. (1999) Contracts, § 317........................................................................................... 71
11
17A C.J.S. (2008) Contracts, § 317........................................................................................... 71
12 In the Matter of Certain Dynamic Random Access Memories, Components Thereof, and
Products Containing Same, 1987 WL 450980, USITC Inv. No. 337-TA-242 (June 8,
13 1987) .........................................................................................................................101, 102
14 In the Matter of Certain Dynamic Random Access Memories, Components Thereof and
Products Containing Same,
15 1987 WL 450856, USITC Inv. No. 337-TA-242, Pub. No. 2034 (Sept. 21, 1987) ............. 102
Simons, Calif. Evid. Manual § 10:9 (2008 ed.) ......................................................................... 68
16
17
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25
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27
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6079319 -v- C 05-00334, 05-02298 RMW
1 Rambus Inc. (“Rambus”) respectfully submits the following proposed post-trial findings
2 of fact and conclusions of law with respect to Samsung’s Counts I-III and Samsung’s affirmative
3 defense of estoppel based on the allegations contained in Counts I-III. These proposed post-trial
4 findings of fact and conclusions of law are based on the evidence admitted in the January 2008
5 coordinated trial and the September 22, 2008 trial in these cases.
6 Having now considered the admissible evidence and arguments of counsel, the Court
7 enters the following findings of fact and conclusions of law. Any finding of fact set forth below
8 that may be deemed a conclusion of law is hereby adopted as a conclusion of law; any conclusion
9 of law set forth below that may be deemed a finding of fact is hereby adopted as a finding of fact.
10 PROPOSED FINDINGS OF FACT
11 A. Background Facts and Procedural History
12 1. Rambus was founded in 1990 by two professors, Dr. Michael Farmwald

13 and Dr. Mark Horowitz, who had been working together to address the increasing gap between
14 microprocessor performance and DRAM performance. Jan. Trial Tr. at 4079:8-4081:24, 4091:9-
15 4095:10, 5489:23-5490:3.1
16 2. On April 18, 1990, Drs. Farmwald and Horowitz filed a patent application,
17 serial number 07/510,898 (“the ’898 application”) containing numerous claims relating to their
18 efforts to solve this performance gap problem. Exh. 5131.
19 3. On April 16, 1991, Rambus filed an international patent application
20 pursuant to the Patent Cooperation Treaty (the “PCT application”). Exh. 3583. The PCT
21 application was published on October 31, 1991. The specification contained in the PCT
22 application was identical to that contained in the ’898 application and described the inventions at
23 issue in this case. See id.
24 4. Rambus received its first issued U.S. patent resulting from the ’898
25 application in September 1993. Exh. 3219. The ’898 application resulted in the filing over time
26
1
27 References herein to “Jan. Trial Tr.” refer to the transcript of the January 2008 coordinated trial.
References to “Trial Tr.” refer to the transcript of the September 22, 2008 trial. References to “Exh.” refer
28 to admitted trial exhibits in either the January 2008 coordinated trial or the September 22, 2008 trial.
6088127.1 C 05-00334, 05-02298 RMW
1 of numerous continuation and divisional applications. Exh. 8888. At least 56 patents have
2 resulted from the ’898 application. Id. Some of the patents that resulted from this process are at
3 issue in these cases.
4 5. On January 25, 2005, Rambus sued Hynix, Infineon, Nanya, and Inotera
5 Memories, Inc. for infringement of certain Rambus patents. See Case No. 05-00334 RMW
6 (“‘334 case”). Rambus filed its First Amended Complaint on June 6, 2005, asserting the same
7 patents as in the original complaint, but adding Samsung as a defendant. On June 6, 2005,
8 Rambus also sued Samsung in a separate suit alleging infringement of certain Rambus patents.
9 See Case No. 05-02298 RMW (“‘2298 case”).
10 6. Samsung subsequently answered and filed counterclaims and affirmative
11 defenses in the ‘334 case and the ‘2298 case. Samsung’s counterclaims and affirmative defenses
12 in both actions included claims for breach of contract, breach of the duty of good faith and fair
13 dealing, aiding and abetting a breach of fiduciary duty, intentional interference with contractual
14 relations, violation of California Bus. & Prof. Code Section 17200, and affirmative defenses such
15 as unclean hands, equitable estoppel, estoppel, and implied license.
16 7. Rambus alleges that a series of “Accused Products,” produced and sold by
17 Samsung, infringe certain Rambus patents. The Accused Products include: SDR SDRAM, DDR
18 SDRAM, SGRAM, GDDR, GDDR2, gDDR2, GDDR3, GDDR4, Mobile-SDRAM, Mobile-
19 DDR-SDRAM, DDR2 SDRAM and DDR3 SDRAM.2
20 8. The Court commenced a trial on January 29, 2008 on the Manufacturers’
21 monopolization, attempted monopolization, Section 17200, fraud, and declaratory judgment of
22 unenforceability claims, and equitable defenses including prosecution laches, estoppel, equitable
23 estoppel, laches, waiver, and patent misuse (“January 2008 trial”).
24 9. Samsung was excused from active participation in the January 2008 trial on
25
2
26 The Accused Products also include memory controllers. In its recent election of twelve claims for an
upcoming trial in these cases, Rambus has not elected to try the claims that it had asserted against
27 Samsung’s memory controllers. See Case No. 05-00334, Docket No. 2218; Case No. 05-02298, Docket
No. 1077. Rambus reserves the right to proceed with its claims against Samsung’s memory controllers in
28 a subsequent trial.
6088127.1 -2- C 05-00334, 05-02298 RMW
1 certain conditions, including that “Samsung agreed to be bound by the result on the prosecution
2 laches aspect” of the January 2008 trial, that “Samsung agreed to the admissibility of any relevant
3 evidence” from the January 2008 trial, that “Samsung agreed that it will not claim collateral
4 estoppel with respect to any factual finding” from the January 2008 trial, and that “the remaining
5 issues” as to Samsung “would be tried to the Court within six months of the result” of the January
6 2008 trial. Superseding Order Regarding Procedural Schedule and Related Matters for September
7 22, 2008 Trial (Case No. 05-00334, Docket No. 1681), at ¶ 3 (May 7, 2008). Samsung agreed to
8 these conditions. See Dec. 14, 2007 Hearing Tr. at 6-7, 9; May 7, 2008 Order at 3 (citing Dec.
9 14, 2007 Hearing Tr.).
10 10. On May 7, 2008, the Court ordered that Rambus and Samsung would have
11 a bench trial commencing on September 22, 2008 in the ‘334 and ‘2298 cases on certain of
12 Samsung’s counterclaims and affirmative defenses and Rambus’s affirmative defenses associated
13 with those claims and defenses.
14 11. On August 11, 2008, the Court granted summary judgment in both actions
15 in Rambus’s favor on Samsung’s claims for aiding and abetting a breach of fiduciary duty,
16 intentional interference with contract, and certain aspects of the Section 17200 claim. Order
17 Granting Rambus’s Motion for Summary Judgment on Counts IV-VII of Samsung’s
18 Counterclaims (Case No. 05-00334, Docket No. 1764; Case No. 05-02298, Docket No. 828)
19 (Aug. 11, 2008).
20 12. On September 16, 2008, the Court entered a stipulation and order of
21 dismissal of certain claims and defenses from both actions with prejudice. Stipulation and Order
22 Dismissing Portions of Certain Claims and Defenses With Prejudice (Case No. 05-00334, Docket
23 No. 2210; Case No. 05-02298, Docket No. 1132) (Sept. 16, 2008).
24 13. As a result of the Court’s August 11, 2008 order and the September 16,
25 2008 stipulation and order of dismissal, Samsung’s claims and defenses from the ‘334 and ‘2298
26 cases that were tried in this phase of the trial of these actions are:
27 • Count I – Breach of Section 3.8 of the SDR/DDR IC and SDR/DDR Memory Module
28 Patent License Agreement (hereinafter the “SDR/DDR License”);
6088127.1 -3- C 05-00334, 05-02298 RMW
1 • Count II – Breach of Section 8.5 of the SDR/DDR License;

2 • Count III – Breach of Duty of Good Faith and Fair Dealing of Sections 3.8 and 8.5 of
3 the SDR/DDR License; and
4 • Estoppel based on the allegations in Counts I-III.3
5 B. Rambus and Samsung Negotiated an RDRAM Technology License and Amendment
6 14. After the PCT application had been made publicly available, various
7 individuals at Samsung, including Joel Karp (who was then Samsung’s senior vice president
8 responsible for strategic product planning and was actively involved in various licensing
9 negotiations) reviewed Rambus’s PCT application. See Jan. Trial Tr. at 3004:12-25 (testimony of
10 Geoff Tate).
11 15. In April 1992, Rambus’s CEO Geoff Tate notified Samsung of Rambus’s
12 PCT application. Specifically, on April 4, 1992, Mr. Tate wrote to Dr. Yong Park, Senior Vice
13 President, Business Development and Product Planning, of Samsung Semiconductor, stating that
14 he would send him a copy of Rambus’s first major patent filing, which had been published
15 publicly in the form of the PCT application. Exh. 10670. In this letter he also advised Dr. Park
16 that the application in the United States had been re-filed as 11 separate applications. On April 7,
17 1992, Mr. Tate provided Dr. Park with a copy of the PCT application, which he stated “is a very
18 basic, broad, fundamental patent with 150 claims.” Exh. 10667.
19 16. The PCT application was also discussed at JEDEC meetings that Samsung
20 attended. See, e.g., Exhs. 3003 (May 1992 JEDEC meeting minutes showing Samsung as
21 participant), 3412 (e-mail from Richard Crisp regarding May 1992 meeting).
22 17. Aware of the potential scope of Rambus’s patent coverage, Samsung
23 entered into license negotiations with Rambus for certain products incorporating Rambus’s
24 proprietary RDRAM technology. Samsung aggressively pursued “non-assertion rights” to be
25 included in that agreement that would, in effect, provide Samsung with certain rights to use of
26
27
3
As set forth below, Rambus does not agree with Samsung’s assertion that it has pled an estoppel defense
28 based on Counts I-III. See Proposed Conclusion of Law Nos. 108-11.
6088127.1 -4- C 05-00334, 05-02298 RMW
1 Rambus’s intellectual property in “non-compatible” (i.e., non-RDRAM) products. See Jan. Trial
2 Tr. at 3069:8-3080:12 (testimony of Geoff Tate); Trial Tr. at 354:12-355:8 (testimony of Jay
3 Shim).
4 18. In November 1994, Rambus and Samsung signed the Semiconductor
5 Technology License Agreement (“RDRAM Agreement”). Exh. 6110. This agreement covered
6 certain intellectual property used in the manufacture and sale of RDRAM devices and required
7 Samsung to pay license fees and several different percentage-of-net-sales royalties. Id. § 4.2(a).
8 19. Section 2.8 of the RDRAM Agreement included a non-assertion clause that
9 provided:
10 Non-Assertion. Notwithstanding the foregoing, subject to the SEC
payments pursuant to Section 4 hereof, Rambus agrees that it, its
11 Subsidiaries, successors and assignees will not assert a claim of
infringement of its intellectual property rights licensed by Rambus
12 hereunder with respect to any other memory products made by SEC
or any of its Subsidiaries, provided that SEC does not intentionally
13 use such non-assertion status granted by Rambus to design, make
and sell devices which compete with Rambus DRAMs and which
14 utilize substantial portions of Rambus technology.”
15 Id. § 2.8.
16 20. Section 10.16 of the RDRAM Agreement included the following “most
17 favored licensee” provision:
18 Most Favored License. Beginning with the Effective Date of this
Agreement, Rambus shall not grant any license under its patents to
19 any person or corporation which has more favorable terms than
those hereby granted to SEC without offering to SEC the benefit of
20 equal terms. “More favorable terms” shall be evaluated in the
aggregate, including but not limited to such factors as products
21 licensed, license fees, prepaid royalties, royalty rates and duration
of royalty payments. Upon the effectivity of a license with more
22 favorable terms, Rambus shall promptly notify SEC and offer SEC
to modify this Agreement to incorporate all of such terms on a
23 prospective basis only.
24 Id. § 10.16.
25 21. In 1996, Intel announced that it planned to endorse “Rambus-2,” a next
26 generation version of Rambus’s proprietary DRAM technology (later known as Direct RDRAM).
27 See Jan. Trial Tr. at 3000:18-3003:11 (testimony of Geoff Tate).
28 22. In 1996 and early 1997, Rambus and Samsung renegotiated the 1994
6088127.1 -5- C 05-00334, 05-02298 RMW
1 RDRAM Agreement because, among other things, Samsung wanted to amend the RDRAM
2 Agreement to cover Direct RDRAM, and Rambus wanted to modify the non-assertion clause.
3 See Jan. Trial Tr. at 3080:2-10 (testimony of Geoff Tate); Trial Tr. at 354:12-355:8 (testimony of
4 Jay Shim); id. at 698-700 (testimony of Geoff Tate).
5 23. Throughout the negotiation of this amendment, Samsung was aware of the
6 potential application of Rambus’s intellectual property to non-RDRAM products such as SDRAM
7 and DDR SDRAM. For example, Rambus and Samsung representatives had a conference call on
8 December 2, 1996 in order to discuss, among other things, the non-assertion clause. Exh. 3329.
9 During this call, Rambus’s CEO, Geoff Tate, told Samsung’s representatives, Dr. Hyung-Kyu
10 Lim and Seong-Soo Kim, that “[he] wasn’t worried about SRAMs, but that any DRAM seemed
11 competitive to [him] and that all the new proposals like synclink and sdram-200 seemed likely to
12 infringe [Rambus’s] IP.” Id. See Jan. Trial Tr. at 3077:22-3079:18. See also Jan. Trial Tr. at
13 3103:12-3104:7, 3105:13-18 (testimony of Mr. Tate that he had conversations with Samsung in
14 the October 1995 timeframe with respect to whether Rambus’s patents in the future would cover
15 non-compatible DRAM products).
16 24. During this time period, Samsung was also analyzing Rambus’s ’327
17 patent. See Exh. 7228A.
18 25. Ultimately, in February 1997, the parties finalized Addendum No. 1 to the
19 RDRAM Agreement. See Exh. 9231. Addendum No. 1 included a revised non-assertion
20 provision, which is set forth in Paragraph 3.1. See Exh. 9231. It no longer gave Samsung free
21 use of Rambus’s inventions in “any other memory products made by SEC or any of its
22 Subsidiaries, provided that SEC does not intentionally use such non-assertion status granted by
23 Rambus to design, make and sell devices which compete with Rambus DRAMs and which utilize
24 substantial portions of Rambus technology.” Exh. 6110, § 2.8. The most favored licensee
25 provision was also narrowed to “apply only to [Samsung’s] license with respect to Rambus-1
26 DRAMs and Rambus-2 DRAMs.” Exh. 9231, § 8.3.
27
28
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1 C. The SDR/DDR License Agreement

2 1. Background
3 26. On July 25, 2000, representatives of Rambus and Samsung met to discuss a
4 potential license covering SDR and DDR products. Exh. 4204. Geoff Tate and Neil Steinberg
5 attended this meeting on behalf of Rambus. Samsung was represented at this meeting by various
6 individuals, including Y.W. Lee, Jay Shim, and several members of Mr. Shim’s intellectual
7 property team. See Trial Tr. at 205:7-15 (testimony of Mr. Shim); id. at 701:4-703:24 (testimony
8 of Mr. Tate).
9 27. A few days after the meeting, Samsung received and reviewed information
10 from Rambus about Rambus’s patents and how Samsung’s products infringed those patents. See
11 Exh. 9062; Trial Tr. at 417:1-419:16 (testimony of Mr. Shim).
12 28. Throughout August 2000, Samsung considered whether it should take a
13 license from Rambus, take the risk of being sued by Rambus, or sue Rambus. Trial Tr. at 422:15-
14 19. Among other things, Samsung joined with other DRAM manufacturers, including companies
15 engaged in litigation with Rambus, to form a joint defense group and retain a law firm to analyze
16 the validity and enforceability of Rambus’s patents. See Exh. 9104 (Joint Representation
17 Agreement, “JRA”); Trial. Tr. at 419:10-422:19 (testimony of Mr. Shim).
18 29. Samsung kept secret from Rambus the fact that it had entered into the JRA.
19 Exh. 9104. See Trial Tr. at 422:9-14 (testimony of Mr. Shim).
20 30. Between August and October 2000, Rambus and Samsung negotiated the
21 terms of a license agreement covering SDR and DDR products. See Exhs. 4208, 4209, 4214,
22 4215, 4216, 4217.
23 31. On October 21, 2000, Rambus signed the SDR/DDR License and sent
24 executed copies to Samsung. Exh. 4222. However, on October 26, 2000, Jay Shim of Samsung
25 requested further revisions to the terms, necessitating a new final draft and re-execution by
26 Rambus. Exhs. 4223, 4224.
27 32. On October 27 and October 31, 2000, Rambus and Samsung respectively
28 signed the SDR/DDR License. Exh. 4226. The SDR/DDR License had an effective date of July
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1 1, 2000 and a five-year term extending through June 30, 2005. Id. §§ 1.1, 8.1.
2 33. Section 3.1 of the SDR/DDR License required Samsung to make an
3 upfront, lump-sum “license fee” payment and to make quarterly royalty payments based on one of
4 four running royalty rates, expressed in terms of a “percentage of [Samsung’s] Net Sales”
5 revenues for specific products. Id. § 3.1.
6 34. The Agreement contains an integration clause providing that “[t]he terms
7 and conditions herein contained constitute the entire agreement between the parties and supersede
8 all previous agreements and understandings, whether oral or written, between the parties hereto
9 with respect to the subject matter hereof.” Id. § 10.14.
10 35. The following factual issues, discussed separately below in sections with
11 headings (2) Section 1.7: The Scope of “Licensed Products” Under the SDR/DDR License, (3)
12 Section 3.8: The Most Favored Licensee Clause, and (4) Section 8.5: The Duty to Negotiate in
13 Good Faith, are in dispute:
14 a. whether the SDR/DDR License granted Samsung a license under
15 certain Rambus patent claims to make and sell DDR2 SDRAM,
16 GDDR3 SDRAM, and subsequent generations of products;
17 b. whether Section 3.8 of the SDR/DDR License was applicable to a
18 third-party settlement agreement and license, such as the Infineon
19 Settlement Agreement, that provided for Rambus to receive a lump-
20 sum payment in installments, rather than running royalties;
21 c. whether the parties’ only obligation under the SDR/DDR License
22 was to negotiate an extension or new agreement in good faith, or
23 whether instead Section 8.5 or any other provision of the
24 SDR/DDR License required the parties to agree on an extension, a
25 new license, or any particular economic terms in such an agreement
26 or extension;
27 d. whether Samsung was in breach of the SDR/DDR License in 2005
28 and earlier; and
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1 e. whether the parties negotiated in good faith.

2 2. Section 1.7: The Scope of “Licensed Products” Under the SDR/DDR License.
3 a. Section 1.7 Defines a Narrow Set of “Licensed Products” by Relying on

Samsung Part Numbers, Data Sheets, and Other Explicit Limitations
4
36. The SDR/DDR License granted Samsung a license under certain Rambus
5
patent claims to make and sell a specifically defined set of “Licensed Products.” Exh. 4226, §
6
1.2. The term “Licensed Product” is defined as “(1) all SDR/DDR ICs and SDR/DDR Memory
7
Modules, and (2) all SDR/DDR ICs and SDR/DDR Memory Modules that are manufactured by a
8
Third Party and Sold or otherwise transferred to Samsung or its Subsidiaries for Re-Sale by
9
Samsung or its Subsidiaries.” Id.
10
37. The SDR/DDR License defines “SDR/DDR IC” to mean “SDR SDRAM,
11
SDR SGRAM, DDR SDRAM, DDR SGRAM, SDR Controller, and DDR Controller.” Id. § 1.3.
12
Each of these categories of products is further defined in the SDR/DDR License. Id. §§ 1.5-1.10.
13
38. Section 1.7 of the SDR/DDR License defines the term “DDR SDRAM.”
14
Exh. 4226 § 1.7. DDR SDRAM is defined to include eight specific Samsung products, which are
15
identified by their part numbers, “K4H280438B, K4H280838B, K4H2281638B, K4H560438B,
16
K4H560838B, K4H561638B, K4D62323HA, and K4D263238M.” Id.
17
39. DDR SDRAM is also defined to include:
18
any future double data rate synchronous dynamic random access
19 memory device which is identical to any device identified by the
above part numbers but may have a different package type,
20 different die size, different burst type, different clock frequency,
different programmable latency, different programmable burst
21 length, different memory storage capacity, different number of
input/output pins, different timing values for existing timing
22 parameters (for example, set-up/hold times and propagation delays),
different power consumption, and/or different number of banks (as
23 those terms are used in the attached DDR SDRAM Data Sheets)
from those set forth in the DDR SDRAM Data Sheets.
24
Id. (emphasis added).
25
40. Thus, the term “Licensed Products” in the SDR/DDR License encompasses
26
future DDR memory devices only if they are identical to the specific Samsung parts identified by
27
part number in Section 1.7, except for the eleven allowed differences enumerated in Section 1.7.
28
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1 If future DDR memory devices differ from the specifically defined Samsung parts then those
2 future DDR memory devices are not “Licensed Products,” unless those differences are limited to
3 the eleven differences set forth in Section 1.7. Put differently, if a DDR memory device is
4 different from one of the numbered Samsung parts in any way that is not specifically enumerated
5 in Section 1.7, then it is not a “Licensed Product.”
6 41. The SDR/DDR License defines licensed memory devices and their various
7 features by reference to “Samsung Data Sheets.” Exh. 4226, §§ 1.5-1.8, 1.11. Thus, for purposes
8 of determining whether a “future double data rate synchronous dynamic random access memory
9 device” constitutes one of the “Licensed Products” within the meaning of the agreement, the
10 differences between the devices listed by part number and any such future memory devices is
11 determined by reference to their respective data sheets. Id. § 1.7; see also Trial Tr. at 854
12 (testimony of Sanjay Banerjee) (noting that “you have to read all these [eleven] categories in the
13 context of the earlier sentence, which is the specifications of the DDR data sheet”).
14 b. DDR2 Memory Devices Are Not “Identical” to the Numbered Parts
Identified in Section 1.7, and the Differences Are Reflected in
15 Samsung’s Data Sheets.
16 42. DDR2 memory devices are not “identical” to any DDR memory devices.
17 Trial Tr. at 529 (testimony of Carl Sechen); id. at 811-12 (testimony of Sanjay Banerjee).
18 43. Samsung’s data sheets for its DDR2 memory devices are not “identical” to
19 the Samsung data sheets for any of the DDR memory devices listed by part number in Section
20 1.7. Compare Exh. 4310 (64MB DDR), Exh. 4306 (256MB DDR) and Exh. 10265 (512MB
21 DDR), with Exh. 10248 (512MB DDR2), Exh. 4351 (512MB DDR2), and Exh. 10316 (1GB
22 DDR2). See also Trial Tr. at 529, 539-40 (testimony of Carl Sechen); id. at 821-22, 832-33, 836-
23 37, 842-44, 846 (testimony of Sanjay Banerjee).
24 44. DDR2 is an “enhancement” over DDR memory devices, and DDR2
25 memory devices contain a number of innovations, some of which are discussed in greater detail
26 below, that make them “substantially different” from the previous generation of DDR memory
27 devices. Trial Tr. at 468 (testimony of Carl Sechen); id. at 812-13 (testimony of Sanjay
28 Banerjee). The various enhancements or innovations included in DDR2 allowed memory devices
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1 to reach “the next frequency domain” and, in fact, allowed them to double in speed. Trial Tr. at
2 468 (testimony of Carl Sechen); id. at 812-13 (testimony of Sanjay Banerjee).
3 c. The Differences Between DDR2 and DDR Go Beyond the Eleven
Allowable Variations Listed in Section 1.7.
4
45. DDR2 memory devices include features, including several innovations
5
identified as “key features” in Samsung’s data sheets, that do not exist in DDR memory devices.
6
Examples of such “key features” that are included in DDR2 but that are not included in DDR
7
include the following: (1) on-die termination, (2) off-chip driver calibration, (3) differential data
8
strobe; (4) posted CAS; and (5) programmable write latency. See, e.g., Exh. 4351 at 3; Exh.
9
10248 at 3; Exh. 10316 at 4.
10
46. All five of these features identified as “key features” appear in Samsung’s
11
DDR2 data sheets; none of these five features appear in Samsung’s DDR data sheets. Compare
12
Exh. 10265 at 4 (DDR), with Exh. 10248 at 3 (DDR2). In fact, Samsung concedes that these five
13
differences, among others, are reflected in the Samsung data sheets. Trial Tr. at 529 (testimony
14
of Carl Sechen).
15
47. The differences between DDR and DDR2 are not limited to these five
16
technologies. Trial Tr. at 539-40 (testimony of Carl Sechen). In fact, Samsung concedes that
17
there are other differences between DDR and DDR2 that are also reflected in Samsung’s data
18
sheets. Id.
19
2. On-Die Termination Is Not One of the Eleven Allowable
20 Variations Described in Section 1.7.
21 48. On-die termination is a new feature in DDR2. Trial Tr. at 479 (testimony
22 of Carl Sechen); id. at 812-18, 821-22 (testimony of Sanjay Banerjee). This difference between
23 DDR2 and DDR is reflected in the Samsung Data Sheets. Compare Exh. 10265 at 4 (DDR), with
24 Exh. 10248 at 3 (DDR2). See also Exh. 10248 at 9 (DDR2 data sheet reflects addition of ODT
25 pin), Exh. 10248 at 20-21 (DDR2 data sheet reflects addition of new ODT-related timing
26 parameters); Exh. 10004 at 12-15; Trial Tr. at 821-24, 828 (testimony of Sanjay Banerjee).
27 49. On-die termination reduces the “signal reflections” that are created when
28 data is transmitted along the bus at very high rates. Exh. 4293 at 1. Without on-die termination,
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1 these signal reflections create “electrical discontinuities” that interfere with “signal integrity” and
2 make it difficult for the memory device to process information accurately. Id. at 1. As a result of
3 this “unwanted noise,” the memory device must operate more slowly to process the information
4 correctly. With on-die termination, however, “[e]nhanced signal performance allows for higher
5 data rates.” Id. at 6. In other words, because on-die termination makes the signal transmitting the
6 data clearer and therefore easier to read, it allows the system to process the data more quickly. Id.
7 50. Among other things, on-die termination enables or allows a memory device
8 to operate more quickly but does not require it to do so. Trial Tr. at 514-15 (testimony of Carl
9 Sechen); id. at 817 (testimony of Sanjay Banerjee). It is not possible to add on-die termination
10 simply by changing the clock frequency; to the contrary, it is necessary to “change the circuitry.”
11 Id. at 514-15, 525 (testimony of Carl Sechen).
12 51. On-die termination is not the same thing as a change in clock frequency.
13 For example, either with or without on-die termination, a memory device can operate with a clock
14 frequency of 200 megahertz (corresponding to a data rate of 400 megahertz). Compare Exh.
15 10265 at 4 (DDR device operating with clock frequency of 200 megahertz) with Exh. 10248 at 3
16 (DDR2 device operating with clock frequency of 200 megahertz). See also Trial Tr. at 514-15
17 (testimony of Carl Sechen). Conversely, the clock frequency of a memory device can change
18 without the addition of on-die termination. See Exh. 4310 at 1 (64 MB DDR at 100, 125, 143,
19 and 166 megahertz); Exh. 10265 at (512MB DDR at 333 and 400 megahertz); see also Trial Tr. at
20 807 (testimony of Sanjay Banerjee).
21 52. Furthermore, on-die termination gives rise to differences other than a
22 potential change in clock frequency. For example, the addition of on-die termination requires
23 new timing parameters, improves the integrity of the signal, and reduces the number of errors in
24 reading data. Trial Tr. at 818 (testimony of Sanjay Banerjee).
25 53. Because on-die termination is a change from DDR technology that goes
26 beyond a mere difference in clock frequency – and beyond any other variation permitted under
27 Section 1.7 – any device containing on-die termination, such as DDR2, is not a “Licensed
28 Product” under the SDR/DDR License. Exh. 4226 § 1.7.
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1 3. Off-Chip Driver Calibration Is Not One of the Eleven

Allowable Variations Described in Section 1.7.
2
54. Off-chip driver calibration is a new feature in DDR2. Trial Tr. at 479
3
(testimony of Carl Sechen); id. at 829-34 (testimony of Sanjay Banerjee). This difference
4
between DDR2 and DDR is reflected in the Samsung data sheets. Compare Exh. 10265 at 4, with
5
Exh. 10248 at 3; See also Exh. 10248 at 14 (DDR2 data sheet reflects addition of OCD and
6
default characteristics); id. at 21 (DDR2 data sheet reflects addition of new OCD-related timing
7
parameter); Exh. 10004 at 9-11; Trial Tr. at 832-33 (testimony of Sanjay Banerjee).
8
55. Off-chip driver calibration increases the size of the “data eye” in a memory
9
device, i.e. the time window during which a data bit can be read accurately (as either 0 or 1).
10
Exh. 4295 at 1. Without off-chip driver calibration, variations in process, voltage, and
11
temperature can narrow the window during which the data is valid. Id. at 1. This narrowing of
12
the data eye can “impact signal integrity,” making it difficult for the data to be read correctly. Id.
13
at 2. Off-chip driver calibration helps to keep the data eye “wide” and “tall” and thereby maintain
14
the “quality of the signaling environment.” Id. at 1. It also helps to compensate for “variations”
15
caused by the “manufacturing and assembly processes.” Id. at 3. Because the signal is clearer
16
and the data eye more stable, the system can operate at “higher communication speeds.” Id.
17
56. Among other things, off-chip driver calibration enables or allows a
18
memory device to operate more quickly but does not require it to do so. Trial Tr. at 514-15
19
(testimony of Carl Sechen); id. at 831 (testimony of Sanjay Banerjee). It is not possible to add
20
off-chip driver calibration simply by changing the clock frequency; to the contrary, it is necessary
21
to “change the circuitry.” Id. at 514-15, 525 (testimony of Carl Sechen).
22
57. Off-chip driver calibration is not the same thing as a change in clock
23
frequency. For example, either with or without off-chip driver calibration, a memory device can
24
operate with a clock frequency of 200 megahertz (corresponding to a data rate of 400 megahertz).
25
Compare Exh. 10265 at 4 (DDR device operating with clock frequency of 200 megahertz) with
26
Exh. 10248 at 3 (DDR2 device operating with clock frequency of 200 megahertz). See also Trial
27
Tr. at 514-15 (testimony of Carl Sechen). Conversely, the clock frequency of a memory device
28
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1 can change without the addition of off-chip driver calibration. See Exh. 4310 at 1 (64 MB DDR
2 at 100, 125, 143, and 166 megahertz); Exh. 10265 at (512MB DDR at 333 and 400 megahertz);
3 see also Trial Tr. at 807 (testimony of Sanjay Banerjee).
4 58. Furthermore, off-chip driver calibration gives rise to differences other than
5 a potential change in clock frequency. For example, the addition of off-chip driver calibration
6 requires new timing parameters, creates a more “robust” signal, and as a result “produces fewer
7 errors in the data.” Id. at 831-33 (testimony of Sanjay Banerjee). See also Exh. 10248 at 14
8 (DDR2 data sheet reflects addition of OCD and default characteristics); id. at 21 (DDR2 data
9 sheet reflects addition of new OCD-related timing parameter); Exh. 10004 at 9-11.
10 59. Because off-chip driver calibration is a change from DDR technology that
11 goes beyond a mere difference in clock frequency – and beyond any other variation identified in
12 Section 1.7 – any device containing off-chip driver calibration, such as DDR2, is not a “Licensed
13 Product” under the SDR/DDR License.
14 4. A Differential Data Strobe Is Not One of the Eleven Allowable
Variations Described in Section 1.7.
15
60. A differential data strobe is a new feature in DDR2. Trial Tr. at 479
16
17
18
Exh. 10248 at 3; see also Exh. 10248 at 23; Trial Tr. at 836-37 (testimony of Sanjay Banerjee).
19
61. A differential data strobe allows the memory device to read data bits (as
20
either 0 or 1) at a “precise instance of time.” Id. at 834. Without a differential data strobe, the
21
memory device must rely on only a “single data strobe” and a timing reference (provided by the
22
crossings of that data strobe with a voltage reference) which could “vary in the time domain.” Id.
23
This sort of variance gives rise to a problem known as “timing skew,” meaning that there is
24
uncertainty about when to “read in or write the data.” Id. at 834-35. By contrast, with a
25
differential data strobe, there are two “intersecting voltage wave forms.” Id. at 835. The crossing
26
points of these wave forms are less subject to timing skew and, therefore, provide a more exact
27
“triggering” mechanism for the memory device to read or write the data. Id. at 835-36. The
28
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1 benefit of a differential data strobe is a wider “data eye” and greater accuracy. Id. at 836.
2 62. Among other things, a differential data strobe enables or allows a memory
3 device to operate more quickly but does not require it to do so. Trial Tr. at 514-15 (testimony of
4 Carl Sechen); id. at 835 (testimony of Sanjay Banerjee). It is not possible to add a differential
5 data strobe simply by changing the clock frequency. Id. (testimony of Carl Sechen). Cf. id. at
6 525 (testimony of Carl Sechen).
7 63. A differential data strobe is not the same thing as a change in clock
8 frequency. For example, either with or without a differential data strobe, a memory device can
9 operate with a clock frequency of 200 megahertz (corresponding to a data rate of 400 megahertz).
10 Compare Exh. 10265 at 4 (DDR device operating with clock frequency of 200 megahertz) with
11 Exh. 10248 at 3 (DDR2 device operating with clock frequency of 200 megahertz). See also Trial
12 Tr. at 514-15 (testimony of Carl Sechen). Conversely, the clock frequency of a memory device
13 can change without the addition of a differential data strobe. See Exh. 4310 at 1 (64 MB DDR at
14 100, 125, 143, and 166 megahertz); Exh. 10265 at (512MB DDR at 333 and 400 megahertz); see
15 also Trial Tr. at 807 (testimony of Sanjay Banerjee).
16 64. Furthermore, a differential data strobe gives rise to differences other than a
17 potential change in clock frequency. For example, the addition of a differential data strobe
18 creates a more “certain” timing mechanism, creates a larger “data eye,” a more “robust” signal,
19 and as a result creates a more accurate process for “reading and writing data.” Trial Tr. at 835-36
20 (testimony of Sanjay Banerjee).
21 65. Because a differential data strobe is a change from DDR technology that
22 goes beyond a mere difference in clock frequency – and beyond any other variation identified in
23 Section 1.7 – any device containing a differential data strobe, such as DDR2, is not a “Licensed
25 5. Posted CAS Is Not One of the Eleven Allowable Variations
Described in Section 1.7.
26
66. Posted CAS is a new feature in DDR2. Trial Tr. at 479 (testimony of Carl
27
Sechen); id. at 837-38 (testimony of Sanjay Banerjee). This difference between DDR2 and DDR
28
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1 is reflected in the Samsung data sheets. Compare Exh. 10265 at 4, with Exh. 10248 at 3; see also
2 Exh. 10004 at 7, 18, 20, 24; Trial Tr. at 841-44 (testimony of Sanjay Banerjee).
3 67. Posted CAS permits the memory device to schedule its read and write
4 commands differently than was done in DDR. Trial Tr. at 841-44 (testimony of Sanjay
5 Banerjee). In particular, it allows the memory device to delay execution of the read or write
6 command after it is issued for an additional period of time, called the “additive latency.” Id. at
7 841-42. This permits the device to avoid “collisions or conflicting commands on the command
8 bus line.” Id. at 841.
9 68. Among other things, posted CAS enables or allows a memory device to
10 operate more quickly but does not require it to do so. Id. at 835 (testimony of Sanjay Banerjee).
11 It is not possible to add posted CAS simply by changing the clock frequency. Id. at 514-15
12 (testimony of Carl Sechen). Cf. id. at 525 (testimony of Carl Sechen).
13 69. Despite the use of additive latency, posted CAS is not a “different
14 programmable latency” within the meaning of § 1.7. In the context of that agreement, “different
15 programmable latency” refers to the possibility of having different values for the “CAS latency,”
16 that is the delay between a read request and the actual output of data, which was already
17 programmable in DDR, as reflected in the DDR data sheets. Exh. 10265 at 4. Indeed, different
18 DDR devices had different CAS latency values. Compare Exh. 4310 at 2 (64 MB DDR with
19 CAS latency values 2 and 3), with Exh. 4306 at 8 (256 MB DDR with CAS latency values 2 and
20 2.5). By contrast, posted CAS involves the addition of an entirely new form of programmable
21 latency, rather than simply different values for the previously programmable CAS latency. Exh.
22 10004 at 7, 18, 20, 24.
23 70. Furthermore, posted CAS gives rise to differences other than a potential
24 change in clock frequency. For example, the addition of posted CAS helps eliminate “collisions
25 or conflicting commands on the command bus line.” Trial Tr. at 841. In turn, this more
26 “streamlined” method of scheduling commands helps to eliminate “gaps” or “bubbles” in the
27 data. Id. at 841-42. As a result, the system can process data more efficiently and effectively. Id.
28 71. Because posted CAS is a change from DDR technology that goes beyond a
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1 mere difference in programmable latency or clock frequency – and beyond any other variation
2 identified in Section 1.7 – any device containing posted CAS, such as DDR2, is not a “Licensed
4 6. Programmable Write Latency Is Not One of the Eleven
Allowable Variations Described in Section 1.7.
5
72. Programmable write latency is a new feature in DDR2. Trial Tr. at 479
6
7
8
Exh. 10248 at 3; see also Exh. 10004 at 24; Trial Tr. at 846 (testimony of Sanjay Banerjee).
9
73. Programmable write latency permits programmable adjustments to the
10
amount of time between when the memory device receives a write command and when it receives
11
the data to be written. Trial Tr. at 844 (testimony of Sanjay Banerjee). In particular,
12
programmable write latency was an improvement on the “inflexible” DDR device, which fixed
13
the write latency at “one clock cycle.” Id. The extra flexibility provided by programmable write
14
latency helps the memory device avoid “collisions or gaps” in the data to be written to the
15
memory. Id. at 845-46.
16
74. Among other things, programmable write latency enables a memory device
17
to operate more quickly but does not require it to do so. Id. at 531 (testimony of Carl Sechen). It
18
is not possible to add programmable write latency simply by changing the clock frequency. Id. at
19
514-15 (testimony of Carl Sechen). Cf. id. at 525 (testimony of Carl Sechen)
20
75. Programmable write latency is not a “different programmable latency”
21
within the meaning of § 1.7. As noted above, in the context of the license agreement, “different
22
programmable latency” refers to different values for CAS latency, a parameter that was already
23
programmable in DDR. Programmable write latency does not involve adding different CAS
24
latency values, but allows programmability of the write latency which previously was fixed. Trial
25
Tr. at 844-46 (testimony of Sanjay Banerjee).
26
76. Furthermore, programmable write latency gives rise to differences other
27
than a potential change in clock frequency. For example, the addition of posted programmable
28
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1 write latency helps eliminate “collisions or gaps” on the command bus line. Trial Tr. at 845-46
2 (testimony of Sanjay Banerjee). In contrast to the “inflexible” or “fixed” clock cycle that existed
3 in DDR, programmable write latency in DDR2 allows the memory “bus” to be “used more
4 efficiently without collisions or gaps.” Id. As a result, the memory device can process data more
5 quickly and effectively. Id.
6 77. Because programmable write latency is a change from DDR technology
7 that goes beyond a mere difference in programmable latency or clock frequency – and beyond
8 any other variation identified in Section 1.7 – any device containing programmable write latency,
9 such as DDR2, is not a “Licensed Product” under the SDR/DDR License.
10 d. The New Features of DDR2 Do Not Fall Under Section 1.7 Merely
Because They “Enable” or “Allow” the Memory Device To Operate at
11 a Higher Clock Frequency.
12 78. The five new features discussed above do not necessitate any change in the
13 clock frequency at which the memory device operates; to the contrary, they exist independently of
14 the clock frequency. In other words, it is possible to change the clock frequency without adding
15 or subtracting any of these features. Conversely, it is possible to add or subtract any or all of
16 these features without changing the clock frequency. Trial Tr. at 514-15, 519-20, 522-23
17 (testimony of Carl Sechen); id. at 807 (testimony of Sanjay Banerjee); Exh. 4306 at 8 (indicating
18 that some DDR devices operate at a clock frequency of 133 megahertz and others at a clock
19 frequency of 200 megahertz). Compare Exh. 10265 at 4 (DDR device operating with clock
20 frequency of 200 megahertz) with Exh. 10248 at 3 (DDR2 device operating with clock frequency
21 of 200 megahertz).
22 79. These new features are not unrelated to clock frequency – as with many
23 improvements to DRAM technology, the “overriding objective” of these new features is to enable
24 or allow the memory device to go faster. Trial Tr. 523-24 (testimony of Carl Sechen); id. at 812-
25 13 (“While these changes, substantial changes enabled higher clock frequency, they by
26 themselves do not necessarily imply a higher clock frequency.”). But these five DDR2 features
27 do not require any adjustment to the clock frequency – in fact, as noted above, there are DDR and
28 DDR2 memory devices that operate at the very same clock frequency. Compare Exh. 10265 at 4
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1 (DDR device operating with clock frequency of 200 megahertz) with Exh. 10248 at 3 (DDR2
2 device operating with clock frequency of 200 megahertz).
3 80. As described above, these five features involve more than just changing the
4 clock frequency or changing programmable latency values and they are not included within the
5 eleven enumerated exceptions set forth in Section 1.7 of the SDR/DDR License.
6 e. The Negotiating History Reinforces the Plain Language of Section 1.7.
7 81. In addition to the plain language of Section 1.7 set forth above, the
8 negotiating history between Rambus and Samsung also demonstrates that both parties understood
9 and intended that Section 1.7 would not provide a license for DDR2 or any other future
10 generations of DRAMs.
11 82. The prior technology agreement between Rambus and Samsung had
12 covered only narrow sets of specifically defined products. In November 1994, Rambus and
13 Samsung entered into an agreement pertaining to specific DRAM technology only, and in
14 particular “Rambus DRAMs, Rambus DRAM Modules, Rambus DRAM Boards, and Rambus
15 DRAM Systems.” Exh. 6110 at 14. Because that agreement covers only Base and Concurrent
16 RDRAM technology, the parties executed an amendment in February 1997 in order to expand the
17 technology agreement to cover Direct RDRAM technology. Exh. 4201; see also Trial Tr. at 354-
18 55 (testimony of Jay Shim).
19 83. Consistent with its practice in 1994, Rambus insisted in 2000 that the
20 SDR/DDR License only cover narrow sets of specifically identified products. V103 (5/14/2008
21 Depo. of Charles Donohoe at 75:16-20); see also V102 (2/6/2001 Depo. of Charles Donohoe at
22 37:8-12, 99:16-100:9) (noting that Rambus “wanted only certain specifically identifiable products
23 to be covered by the agreement”).
24 84. Rambus’s policy was to license its technology only with respect to
25 products commercially available at the time a license agreement is executed. Trial Tr. at 707
26 (testimony of Geoff Tate). DDR2 devices were not commercially available at the time the
27 SDR/DDR License was drafted, negotiated, and entered into by the parties. See Trial Tr. at 706
28 (testimony of Geoff Tate); id. at 222-23 (testimony of Jay Shim).
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1 85. Rambus created the initial draft of the SDR/DDR License and sent it to
2 Samsung on August 10, 2000. Exhs. 4208, 4209. Section 1.7 was included in this original draft
3 of the SDR/DDR License in essentially the same form in which it appeared in the final executed
4 SDR/DDR License. Exh. 4209 at 4-5.
5 86. Rambus’s Chief Executive Officer Geoff Tate reviewed the draft
6 SDR/DDR License to ensure that it was consistent with the company’s policy of licensing only
7 commercially available technology. Trial Tr. at 721-22 (testimony of Geoff Tate).
8 87. Samsung wanted the license agreement to cover “all products” and to
9 obtain a “complete peace accord with Rambus” so that it did not require “a continuing series of
10 negotiations as new products [came] on the market.” V102 (2/6/2001 Depo. of Charles Donohoe
11 at 99:16-100:9); see also V103 (5/14/2008 Depo. of Charles Donohoe at 75:21-76:9). Rambus
12 would not give Samsung a total “peace accord.” Instead, Rambus told Samsung that it did not
13 want the license “to cover future DRAM generations.” V103 (5/14/2008 Depo. of Charles
14 Donohoe at 75:16-20).
15 88. Samsung’s negotiators knew that DDR2 devices were not commercially
16 available at the time the SDR/DDR License was negotiated. See Trial Tr. at 222-23 (testimony of
17 Jay Shim). In fact, Samsung did not begin manufacturing DDR2 devices until two to three years
18 after the SDR/DDR License was executed. Id. at 223 (testimony of Jay Shim).
19 89. Even though Samsung’s attorneys knew that the company was developing
20 what would later become DDR2 devices at the time they negotiated the SDR/DDR License in
21 2000, and even though they knew that Rambus “did not want [the agreement] to cover future
22 DRAM generations,” they never discussed “technical details” with Rambus during the course of
23 the negotiations. Trial Tr. at 357, 361 (testimony of Jay Shim).
24 90. During the negotiations, Samsung tried to obtain broader language in
25 Section 1.7. On October 16, 2000, Mr. Shim requested a revision of Section 1.7 and other clauses
26 defining the products licensed under the SDR/DDR License. See Exh. 4215. With respect to the
27 licensing of future DDR SDRAM devices, Mr. Shim asked for the license to include products
28 “substantially similar” to the devices that were identified by specific Samsung part numbers, and
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1 to substitute this broader phrase in place of the existing language, which licensed only future
2 products “identical” to the specific products identified by part number, except for eleven allowed
3 and enumerated differences. Exh. 4215 at 3.
4 91. However, Rambus “would not budge” on its position that products would
5 not be covered under the SDR/DDR License if Samsung “changed the products down the road.”
6 V102 (2/6/2001 Depo. of Charles Donohoe at 100:3-9).
7 92. On October 16, 2000, Mr. Steinberg sent an email stating Rambus’s
8 position that it was unwilling to amend the language of Section 1.7’s limitation on future DDR
9 memory devices. Exh. 4216. His email explained that the existing provisions, including Section
10 1.7, “adequately cover devices which may have evolutionary (as opposed to revolutionary)
11 differences from the devices specified by part number.” Exh. 4216 at 1. Mr. Steinberg noted that
12 any coverage of evolutionary devices was limited to the eleven allowed differences in Section
13 1.7, as drafted, i.e. if they were “identical to an identified device except for different package
14 type, different die size, etc.” Id.
15 93. On October 27, 2000, Mr. Steinberg executed the SDR/DDR License on
16 behalf of Rambus. On October 31, 2000, Jon Kang executed the SDR/DDR License on behalf of
17 Samsung. Exh. 4226 at 28.
18 94. Section 1.7 of the final executed agreement was unchanged in all material
19 terms from the draft originally circulated by Mr. Steinberg on August 10, 2000. Compare Exh.
20 4209 at 4-5, with Exh. 4226 at 5-6. See Trial Tr. at 363 (testimony of Jay Shim) (agreeing that
21 the substantive language of Section 1.7 “was never modified from the original draft”).
22 95. After the SDR/DDR License was signed, Samsung again tried and failed to
23 expand the scope of “Licensed Products,” this time in the context of Section 8.5, which pertained
24 to the negotiation of a renewal or extension.
25 96. On November 7, 2000, Mr. Shim sent an “amendment proposal” to Mr.
26 Steinberg via email. Exh. 4230 at 1. In the proposed amendment attached to that email, Mr.
27 Shim suggested adding additional language to Section 8.5 of the agreement, which pertained to
28 the parties’ agreement “to negotiate in good faith” toward a contract extension or renewal
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1 agreement “six (6) months before the expiration of this Agreement.” Exh. 4230 at 1; Exh. 4231
2 at 2. The language proposed by Mr. Shim in his Amendment A provided that any extension or
3 renewal could not contain royalty rates greater than those set forth in the SDR/DDR License “for
4 substantially similar categories of licensed products,” essentially the same language Rambus had
5 refused to include in Section 1.7 of the SDR/DDR License. Id. at 1. Such a change would not
6 have been necessary if the scope of “Licensed Products” was as broad as Samsung now contends.
7 97. On November 21, 2000, Mr. Steinberg sent an email responding to Mr.
8 Shim’s proposed Amendment A. Exh. 4232 at 1. Mr. Steinberg attached a revised draft that
9 omitted Mr. Shim’s proposed language regarding “substantially similar categories of licensed
10 products,” and he inserted in its place narrower language that, consistent with Section 1.7, would
11 have limited application of the amendment to “any category of products corresponding to SDR
12 SDRAM, SDR SGRAM, DDR SDRAM and DDR SGRAM.” Exh. 4233 at 1.
13 98. Neither of these proposed amendments to the SDR/DDR License was ever
14 signed or assented to by the parties. Trial Tr. at 248 (testimony of Jay Shim).
15 99. Later, after the May 2001 Infineon verdict, the parties did negotiate and
16 execute a different amendment in July 2001. Exh. 4240 (Amendment No. 1). As originally
17 proposed by Samsung, this amendment would have entailed a commitment by Rambus to
18 negotiate a renewal agreement for all Rambus patents. Exh. 10681 at 4. As executed, however,
19 this amendment imposed an obligation on Rambus to negotiate a renewal agreement only with
20 respect to “Licensed Products,” as that term had been defined under the SDR/DDR License. Exh.
21 4240 ¶ 1 (“This Amendment No. 1 relates solely and exclusively to SDR SDRAM, SDR
22 SGRAM, DDR SDRAM and DDR SGRAM as defined in the Agreement . . . .”). Thus, the
23 parties never agreed to expand the scope of “Licensed Products” from the original narrow
24 language in the initial draft of the SDR/DDR License.
25 100. As early as July 9, 2004, at a meeting in Korea between Rambus and
26 Samsung, Rambus told Samsung it needed to sign a further license for its use of Rambus’s
27 inventions in DDR2.
28 101. At that July 9, 2004 meeting, John Danforth, Ira Blumberg, and other
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1 Rambus personnel gave a detailed presentation to Samsung explaining Rambus’s view that the
2 SDR/DDR License did not encompass DDR2 or other future generations of DDR products. Trial
3 Tr. at 334 (testimony of Jay Shim); id. at 946-47 (testimony of Ira Blumberg); see also Exh. 4251
4 at 45-49.
5 102. Rambus’s presentation expressly called attention to the language of Section
6 1.7 and gave five examples of new features included in DDR2, including on-die termination, off-
7 chip driver calibration, differential data strobe, posted CAS, and programmable write latency, that
8 were not within the scope of the exceptions to DDR that were allowed. Exh. 4251 at 46-47.
9 Rambus’s presentation also expressly called attention to the Rambus patent claims that were
10 infringed by the new features included in DDR2 and that were not licensed. Exh. 4251 at 23-42.
11 103. At the July 9, 2004 meeting, Rambus invited Samsung to explain why it
12 contended that DDR2 was licensed by the SDR/DDR License. See Exh. 4251 at 45. At that time,
13 Samsung did not point to any language in the SDR/DDR License, any Samsung data sheets, or
14 any other documents to support its view that DDR2 was included in the license. Trial Tr. at 946-
15 48 (testimony of Ira Blumberg). Nor, at any point after this July 9, 2004 meeting did Samsung
16 ever point to language in the license agreement or other documents supporting its assertion that
17 DDR2 was licensed. See Trial Tr. at 947 (testimony of Ira Blumberg).
18 f. Section 1.10: Licensing of “DDR Controllers”
19 104. The SDR/DDR License also granted Samsung a license under certain
20 Rambus patent claims to make and sell “DDR Controller[s].” Exh. 4226, §§ 1.2, 1.3.
21 105. DDR Controller is defined as “any Samsung logic product having circuitry
22 integrated thereon or therein that is capable of controlling DDR SDRAM or DDR SGRAM of
23 Samsung.” Id. § 1.10.
24 106. However, it was understood at the time of the SDR/DDR licensing
25 negotiations that controllers might be developed that would be capable of controlling not only
26 DDR SDRAM and DDR SGRAM memory devices, but also future memory devices. See Jan.
27 Trial Tr. at 701-704 (testimony of Desi Rhoden); id. at 1975, 1977-78, 1992-94 (testimony of Joe
28 Macri); id. at 3150-52 (testimony of Terry Lee). The language in Section 1.10 is clear that the
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1 term “DDR Controller” does not encompass Samsung devices “capable of controlling a future
2 memory device (including, without limitation, a future memory device having a specification
3 conforming to, issued or promulgated by the DDR II, AMI II, and/or ADT group or consortium
4 and/or any successor thereto or thereof and/or the like) other than a SDR SDRAM, SDR SGRAM,
5 DDR SDRAM, or DDR SGRAM as defined herein.” Id. (emphasis added).
6 107. On the basis of this language, Samsung contends that the SDR/DDR
7 License should be construed to include a license for DDR2 since the parties “knew how to
8 exclude DDR2 when they wanted to.” Trial Tr. at 1093-94.
9 108. Samsung’s reading of the SDR/DDR License is unpersuasive. In fact, the
10 language of Section 1.10 requires the opposite conclusion.
11 109. Because controllers are capable of controlling multiple generations of
12 memory devices, Section 1.10 explicitly excludes any controller that, in addition to controlling
13 the specific existing products covered by the license, “at the discretion of the customer, is capable
14 of controlling a future memory device.” Exh. 4226 § 1.10.
15 110. Contrary to Samsung’s suggestion, this language merely reinforces the
16 parties’ intent to limit the scope of the SDR/DDR License to then existing products. That the
17 parties expressly contemplated and excluded from the SDR/DDR License existing controllers to
18 the extent they could be used with future generations of DRAM technology only underscores that
19 the parties did not intend to establish a license for such future technology in any respect, and thus
20 reinforces the Court’s conclusion that the SDR/DDR License did not extend to DDR2 technology
21 itself.
22 111. Moreover, if “DDR” had been intended to include “DDR2,” then Section
23 1.10 of the SDR/DDR License would read as an absurdity. Specifically, Section 1.10 would
24 provide: “Under no circumstance shall ‘DDR Controller’ include a logic product having circuitry
25 . . . that controls or is capable of controlling . . . [DDR2 SDRAM], that, at the discretion of the
26 customer, is capable of controlling a future memory device (including, without limitation . . .
27 [DDR2]) other than a . . . [DDR2 SDRAM] as defined herein.” Exh. 4226 § 1.10 (emphasis
28 added). Under this interpretation, the exclusion of controllers capable of controlling DDR2
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1 would be wholly negated by the exception to that exclusion. Because contractual provisions must
2 be interpreted together to give effect to each provision and should not be construed in a manner
3 that would produce absurd results, Cal. Civ. Code §§ 1638, 1641, Sections 1.7 and 1.10 of the
4 SDR/DDR License cannot be construed to license DDR2 technology.
5 g. Section 1.12: The Scope of Licensed “Rambus Patents”
6 112. The SDR/DDR License provides Samsung a release for any claim of
7 infringement with respect to “Rambus Patents” as defined in the agreement. Exh. 4226, § 2.1
8 113. Section 1.12 defines the term “Rambus Patents” to include “all claims of
9 patents, utility models, and patent applications . . . which cover . . . any Licensed Product (as
10 expressly defined herein), which is commercially available from Samsung or its Subsidiaries as of
11 the Effective Date,” which was July 1, 2000. Exh. 4226, §§ 1.1, 1.12 (emphasis added).
12 114. Thus, the SDR/DDR License provides a release for any claim of
13 infringement of Rambus patent claims that covered a product commercially available from
14 Samsung on July 1, 2000. In other words, the SDR/DDR License released infringement claims
15 only as to patent claims which covered inventions embodied in Samsung products commercially
16 available at the time the agreement was executed. Conversely, if a Rambus patent claim did not
17 read on a “Licensed Product” that was commercially available from Samsung on July 1, 2000,
18 then it is not a “Rambus Patent” as that term is defined in Section 1.12 and thus Samsung was not
19 licensed under that patent claim.
20 h. DDR2 Memory Devices Were Not “Commercially Available” As Of
the Effective Date of the SDR/DDR License.
21
115. DDR2 was not commercially available at the time the SDR/DDR License
22
was negotiated. See Trial Tr. at 222-23 (testimony of Jay Shim). In fact, Samsung did not begin
23
manufacturing DDR2 devices until two to three years after the SDR/DDR License was executed.
24
Trial Tr. at 223 (testimony of Jay Shim).
25
116. Although Samsung began designing a new memory device in 1999 that
26
contained many features of what would eventually become DDR2 technology, that device was
27
never mass-produced or commercially available because it did not comply with industry-standard
28
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1 JEDEC specifications. V106 (8/29/07 Depo. of Jung-Bae Lee at 144:10-15, 145:1-5). Samsung
2 did not create JEDEC-compliant prototypes for DDR2 until the middle of 2003, id. at 163:6-12,
3 163:25-164:9, and, therefore, there were no commercially available Samsung DDR2 parts until
4 after that time.
5 i. DDR2 Contains Technology That Was Not Included In Products
Commercially Available In 2000 and That Is Covered By Rambus
6 Patent Claims.
7 117. As discussed above, DDR2 contains new “key features.” See Proposed
8 Findings of Fact Nos. 45-46. The evidence adduced at trial by Samsung demonstrated that many
9 of these new features are covered by patents. See Exh. 4292 (patent for on-die termination); Exh.
10 4294 (patent for off-chip driver calibration); Trial Tr. at 525-26 (testimony of Carl Sechen).
11 118. Indeed, Samsung’s expert testified that, in forming his opinion, he relied on
12 information demonstrating that Rambus has patents that cover new key features of DDR2. Trial
13 Tr. at 527; see also Exh. 4293 (indicating that Rambus patents are directed to on-die termination);
14 Exh. 4295 (indicating that Rambus patents are directed to off-chip driver calibration).
15 119. Moreover, DDR2 devices use programmable write latency, which is
16 covered by certain Rambus patent claims that are directed to that feature. See generally Exh.
17 4251 at 26-48 (Rambus presentation to Samsung on July 9, 2004); Declaration of Miriam Kim In
18 Support of Rambus’s Post-Trial Findings of Fact and Conclusions of Law (“Kim Decl.”), Ex. A
19 (January 2008 Trial Jury Notebook Chart). See also Trial Tr. at 527 (testimony of Carl Sechen)
20 (conceding that Rambus’s patents are directed to some of the new key features of DDR2);
21 Rambus Inc.’s Disclosure of Asserted Claims and Final Infringement Contentions Pursuant to
22 Scheduling Order and Patent Local Rules (Aug. 1, 2008) at 2.4
23 120. DDR2 devices using programmable write latency are covered by Claim 16
24 of Rambus’s U.S. Patent No. 6,266,285. Kim Decl., Ex. A at 1. That patent claim does not read
25
4
26 The claims described here with respect to programmable write latency are not the only claims that
Rambus could assert on the new features embodied in DDR2 and/or subsequent generations of DRAMS,
27 and the description here of specific claims infringed by Samsung should not be construed as a waiver of
any infringement claims that Rambus might otherwise possess. See Exh. 4251 at 26-41 (describing the
28 infringement of certain Rambus patent claims by DDR2 devices).
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1 on DDR or any other Licensed Product that was commercially available through Samsung as of
2 July 1, 2000. See Exh. 4251 at 48.
3 121. DDR2 devices using programmable write latency are covered by Claims 27
4 and 43 of Rambus’s U.S. Patent No. 6,314,051. Kim Decl., Ex. A at 1. Those patent claims do
5 not read on DDR or any other Licensed Product that was commercially available through
6 Samsung as of July 1, 2000. See Exh. 4251 at 48.
7 122. DDR2 devices using programmable write latency are covered by Claim 34
8 of Rambus’s U.S. Patent No. 6,584,037. Kim Decl., Ex. A at 1; see also Exh. 4251 at 39-43.
9 That patent claim does not read on DDR or any other Licensed Product that was commercially
10 available through Samsung as of July 1, 2000. See Exh. 4251 at 48.
11 123. Because these patent claims are directed to the programmable write latency
12 feature and do not read on any Samsung product that was commercially available as of July 1,
13 2000, those claims are not included within the definition of “Rambus Patents” in the SDR/DDR
14 License. Therefore, the SDR/DDR License does not release Samsung from liability for any
15 infringement of those claims.
16 j. The Negotiating History Reinforces the Plain Language of Section
1.12.
17
124. During licensing discussions on July 25, 2000, Rambus told Samsung that
18
the SDR/DDR License would provide a release for “all patents owned by Rambus which are
19
infringed by currently available LICENSED PRODUCTS.” Exh. 4204 at 4.
20
125. Samsung recognized that the SDR/DDR License limited the patent claims
21
under which Samsung was licensed to those that read on products manufactured by Samsung and
22
commercially available as of July 1, 2000. For this reason, Samsung tried to broaden the
23
definition of “Rambus Patents” during negotiations.
24
126. On October 26, 2000, Mr. Shim emailed Mr. Steinberg with four proposed
25
changes to the agreement. One suggested change was to broaden Section 1.12(i). In particular,
26
Mr. Shim sought to expand the definition of the term “Rambus Patents” so that it would
27
encompass all patent claims covering “all Licensed Products and their future parametrically
28
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1 improved versions.” See Exh. 4223. Though Mr. Steinberg incorporated other requested changes
2 from Mr. Shim’s October 26 email, he did not incorporate the requested change to Section 1.12(i)
3 into the final SDR/DDR License. See Exh. 4226.
4 127. Samsung has offered no evidence to prove that new features included in
5 DDR2 or other future generations of DRAM devices that it made commercially available after
6 July 1, 2000, are not covered by Rambus patent claims that did not cover DDR devices. To the
7 contrary, Samsung’s expert essentially conceded that new features included in DDR2 devices and
8 not included in DDR devices incorporate inventions that are covered by Rambus patent claims.
9 See Trial Tr. at 525-27 (testimony of Carl Sechen).
10 128. It would not have made sense for the parties to have agreed that certain
11 products were licensed under only some of the patent claims that cover them, but not all of
12 Rambus’s patent claims that cover them. Instead, the SDR/DDR License should be construed to
13 provide that the products covered by the license are co-extensive with the patent claims licensed
14 under the agreement. In other words, since the licensed patents claims were limited to those that
15 covered products commercially available from Samsung on July 1, 2000, it is appropriate to
16 construe the licensed products as limited to those products then commercially available, with the
17 exception of the eleven allowed differences, which it appears the parties did not expect would
18 involve any substantial differences and certainly not any patented or patentable differences.
19 129. This interpretation is fully consistent with and indeed required by
20 California law, which requires that “[t]he whole of a contract is to be taken together, so as to give
21 effect to every part, if reasonably practicable, each clause helping to interpret the other.” Cal.
22 Civ. Code § 1641. Here, in light of Rambus’s intent and Samsung’s understanding that only a
23 limited set of commercially available products would be licensed, the only plausible construction
24 of Sections 1.7 and 1.12 is that the SDR/DDR License does not encompass a license for DDR2
25 and subsequent generations of DRAM technology. Both clauses reinforce the plain language and
26 the intent of the parties that such devices would not be licensed under the SDR/DDR License.
27
28
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1 k. The “Licensed Products” Defined in Section 1.7 Do Not Include DDR2,

DDR3, GDDR2, GDDR3, GDDR4 or GDDR5, or Any Generations of
2 DRAM After DDR.
3 130. Samsung presented evidence at trial only with respect to DDR2. In its
4 pleadings, it appears to contend that DDR3, GDDR2, GDDR3, GDDR4, and GDDR5 were also
5 licensed under the SDR/DDR License. See Samsung Trial Br. at 26; see also id. at 29-34.
6 However, based upon its failure to offer any evidence in support of that contention, Samsung
7 appears to have abandoned that contention.
8 131. The Court thus finds, based upon the evidence adduced at trial, as well as
9 Samsung’s failure to adduce evidence on the subject, that DDR2 and later generations of
10 SDRAMs, such as DDR3, GDDR2, GDDR3, GDDR4, and GDDR5, were not “Licensed
11 Products” as that term is defined in Section 1.7 of the SDR/DDR License and thus are not
12 licensed under the SDR/DDR License.
13 3. Section 3.8: The Most Favored Licensee Clause
14 a. Section 3.8 Does Not Give Samsung the Right to Adjust Its Royalty
Obligations in Response to a Third Party’s Agreement to Make a
15 Lump Sum Payment to Rambus.
16 132. Section 3.8 is the most favored licensee provision in the SDR/DDR
17 License. Specifically, Section 3.8 provides:
18 If at any time during this Agreement, the royalty rate agreed to be
paid or ordered to be paid by a Third Party, whether by settlement
19 or by court or agency order, for products corresponding to SDR
SDRAM, SDR SGRAM, DDR SDRAM, or DDR SGRAM is lower
20 than that specified in Section 3.1(b) of this Agreement, Rambus
shall notify Samsung, in writing, within ten (10) days of the
21 effective date of such lower royalty rate and such lower royalty rate
shall be effective for this Agreement the first day of the royalty
22 reporting period in which written notice by Rambus is made.
23 Exh. 4226, § 3.8.
24 133. Under Section 3.8, Samsung automatically receives the benefit of any
25 lower royalty rate for the products specifically delineated in Section 3.1(b) beginning with the
26 quarter in which such lower rate first takes effect. Id. Section 3.8 addresses only standard or
27 running royalty rates to be paid by third parties for the four identified products. It does not
28 require a calculation of a new royalty rate in the event that Rambus receives other forms of
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1 consideration in return for a license to some or all of its patents, such as a lump sum, fixed or flat
2 payments, or non-monetary consideration. Compare Exh. 4226, § 3.8 with Exh. 10681, ¶ 8.
3 Section 3.8 does not specify any method by which such a calculation should be made, which is
4 consistent with the Court’s conclusion that Section 3.8 does not require any such calculation. See
5 Exh. 4226, § 3.8.
6 b. During The Negotiation of the SDR/DDR License, Samsung Sought --
and Rambus Rejected -- A Broader Most Favored Licensee Clause.
7
134. Samsung sought a provision requiring adjustment of its royalty rates on the
8
basis of third-party agreements that did not contain product-specific running royalty rates, but this
9
provision was not included in the SDR/DDR License.
10
135. On August 10, 2000, Neil Steinberg sent a draft license agreement to Jay
11
Shim. See Exhs. 4208, 4209. This draft did not contain any most favored licensee provision. See
12
id.
13
136. On October 6, 2000, Jay Shim sent a proposed term sheet to Neil Steinberg
14
that requested a “Most Favorable Nations Clause.” Exh. 4214, ¶ 8. Mr. Shim specifically asked
15
for a guarantee of “the lowest possible royalty rates and fees among all licensees,” and the right
16
to retroactively amend the “royalty terms of the Agreement” in the event that a post-execution
17
judgment or settlement resulted in “lower royalty terms” than Samsung agreed to. Id. Under Mr.
18
Shim’s proposed terms, Rambus would be required to refund the difference of any excess
19
payments following such an adjustment. See id.
20
137. On October 11, 2000, Mr. Steinberg sent Mr. Shim a revised draft of the
21
license agreement including a version of the provision that became Section 3.8 in the final
22
SDR/DDR License. See Exh. 4217 (see red-lines within for October 11, 2000 draft). Mr.
23
Steinberg’s proposed language for Section 3.8 gave Samsung an option to apply a “lower royalty
24
rate” paid by a third-party for SDR SDRAM, SDR SGRAM, DDR SDRAM, or DDR SGRAM.
25
See id., § 3.8.
26
138. On October 16, 2000, Mr. Shim responded with suggested revisions to,
27
among other things, Section 3.8 of the October 11, 2000 draft. See Exh. 4215. Mr. Shim copied
28
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1 Charles Donohoe on those communications and consulted with Mr. Donohoe before submitting
2 these revisions. See id.; see also V105 (6/9/2008 Depo. of Jay Shim at 205:21-206:6). Mr.
3 Donohoe was not copied on any further correspondence with Rambus after October, 16, 2000,
4 and testified that this post-October 16 period of negotiations was “a black hole to me.” V103
5 (5/14/2008 Depo. of Charles Donohoe at 99:9-21).
6 139. The proposed revisions that Mr. Shim sent on October 16, 2000 after
7 consulting with Mr. Donohoe included a request that Sections 3.8 through 3.10 of Mr. Steinberg’s
8 draft be replaced with language permitting Samsung to adjust the royalty it paid to Rambus to
9 take into account consideration paid by third parties that was other than a running royalty.
10 Specifically, Mr. Shim requested the addition of 3.8 (d), which provided:
11 3.8 (d) Should any Third Party be granted a license on the basis of
consideration other than a running royalty (for example, a lump
12 sum), then Rambus shall inform Samsung within ten (10) days
thereof together with the value of the consideration and offer
13 Samsung the opportunity to adjust or convert this Agreement such
that the payments made and to be made by Samsung are on the
14 most favored basis Samsung shall have thirty days in which to
enter into good faith negotiations with Rambus toward adjusting or
15 converting this Agreement. If after ninety (90) days or a time
otherwise mutually agreed upon, the parties have failed to reach an
16 agreement, the dispute resolution provisions of Section 9.3 shall
apply.
17
Exh. 4215, ¶ 13.
18
140. Mr. Shim’s proposed Section 3.8 (d), unlike the language proposed by
19
Rambus (or the language that the parties ultimately adopted), did not call for an automatic
20
adjustment of Samsung’s royalty rate. Instead, because the conversion of consideration other
21
than a running royalty, such as a lump sum payment, can be complex, not susceptible to a unique
22
solution and/or subject to disagreement, this provision required Samsung to negotiate with
23
Rambus in good faith over whether and how to adjust the license terms. See Exh. 4215, ¶ 13.
24
Mr. Shim also provided in Section 3.8 (e) that “[t]he dispute resolution provisions” of the contract
25
would apply to disputes over how to implement these provisions. Id.
26
141. On October 17, 2000, as reflected in Mr. Steinberg’s revised draft of the
27
agreement, Rambus refused to incorporate Mr. Shim’s proposed Section 3.8 (d) and 3.8 (e). See
28
6088127.1 -31- C 05-00334, 05-02298 RMW
1 Exhs. 4216, 4217. Indeed, the October 17 draft left Section 3.8 unchanged. See Exh. 4217. In
2 the end, Mr. Steinberg did not incorporate any of Samsung’s proposed language for Mr. Shim’s
3 proposed Sections 3.8 (d) and 3.8 (e) and these provisions were not included in the final version
4 of the agreement. See Exh. 4226; Trial Tr. at 228:9-22.
5 142. On October 22, 2000, Mr. Steinberg sent Mr. Shim an executed version of
6 the agreement. See Exh. 4222. This version was based on an October 20 draft, which further
7 revised Section 3.8. See Exh. 4222 at 50 (redline). This version of Section 3.8 is identical to
8 Section 3.8 in the final agreement. Compare Exh. 4222 at 50 with Exh. 4226 at 17-18. This
9 version did not incorporate the text or substance of Sections 3.8(d) and 3.8(e) that Mr. Shim had
10 proposed on October 16, 2000.
11 143. On October 26, 2000, Mr. Shim requested further revisions to the license
12 agreement. See Exh. 4223. Mr. Shim did not request any further revisions to Section 3.8, but did
13 ask Mr. Steinberg to “go ahead and lift the arbitration procedure in its entirety.” See id. Mr.
14 Steinberg removed the arbitration and dispute resolution provision contained in Section 9.3 of the
15 October 22, 2000 draft. Compare Exh. 4223, § 9.3 with Exh. 4226.
16 144. Rambus signed the SDR/DDR License on October 27, 2000 and Samsung
17 signed on October 31, 2000. See Exh. 4226. Again, this version did not incorporate the text or
18 substance of Sections 3.8(d) and 3.8(e) that Mr. Shim had proposed on October 16, 2000.
19 c. The Parties Specifically Distinguished Royalty Rates From Lump Sum
Payments In The 2001 Amendment To The SDR/DDR License.
20
145. In May 2001, Rambus suffered an adverse verdict in the Infineon litigation.
21
See Trial Tr. at 735:15-22. Thereafter, Samsung told Rambus it intended to withhold its first
22
quarter 2001 royalty payments while it evaluated the litigation. See Exhs. 9109, 9112. Rambus
23
informed Samsung that it was critical that Samsung make its payments, which were sizeable at
24
the time, because Rambus was a small company and Samsung’s failure to make payments would
25
constitute a material event that would have to be reported to Rambus’s shareholders. See Exh.
26
9112; Trial Tr. at 738:8-21. In the following weeks, the parties negotiated Amendment No. 1 to
27
the SDR/DDR License that modified Samsung’s royalty obligations with respect to SDR/DDR
28
6088127.1 -32- C 05-00334, 05-02298 RMW
1 memory modules.
2 146. On July 6, 2001, Jon Kang sent David Mooring an initial draft of
3 Amendment No. 1. See Exh. 9111. Later that day, Mr. Mooring sent Mr. Kang a revised draft.
4 See Exh. 9110.
5 147. On July 10, 2001, Mr. Shim sent Mr. Mooring a further revised draft. See
6 Exh. 10681. In contrast to previous drafts of the amendment, and in contrast to the language of
7 the SDR/DDR License, Mr. Shim’s July 10 draft of the most-favored licensee provision included
8 a procedure for calculating a “rate” from lump sum payments that Rambus might receive from
9 third parties. Specifically, Paragraph 8 provided as follows:
10 In case of a lump-sum form of payment occurring anytime during
the Agreement or thereafter, the term “rate” shall mean the royalty
11 amount agreed to be paid by a party not heretofore [sic] divided by
the worldwide sales and/or reasonably projected worldwide sales of
12 licensed products of that party during the term of such agreement.
13 Exh. 10681, ¶ 8; see also Trial Tr. at 403:16-404:12. This language indicates Mr. Shim’s
14 understanding at the time that a lump sum payment is not a “rate,” and that inclusion of lump sum
15 payments within the most favored licensee provisions of the Amendment necessarily would
16 require some further agreement as to how to derive a “rate” from such a payment.
17 148. If Section 3.8 of the SDR/DDR License had already included lump sum
18 payments within the scope of the “royalty rates” referred to in Section 3.8, Mr. Shim’s additional
19 proposed language in Paragraph 8 of the July 10, 2001 draft would have been unnecessary
20 surplus.
21 149. The final version of Amendment No 1 does not include Mr. Shim’s
22 proposed language specifying the calculation of a “rate” from a lump sum payment. See Exh.
23 4240 ¶ 8; Trial Tr. at 408:10-15. Paragraph 8 of Amendment No. 1 only requires the parties, in
24 the event of a lump sum payment, “to negotiate in good faith to modify the payment terms of the
25 Agreement.” See Exh. 4240 ¶ 8.
26 150. If Section 3.8 of the SDR/DDR License had included lump sum payments
27 within the scope of the “royalty rates” referred to in Section 3.8, Amendment No. 1 would have
28 been less favorable to Samsung than the original terms of Section 3.8. Specifically, if, as
6088127.1 -33- C 05-00334, 05-02298 RMW
1 Samsung contends, Section 3.8 requires an automatic adjustment of the amount Samsung was
2 required to pay in the event of lump sum royalty payments made to Rambus by a third party, then
3 the language of Paragraph 8 of Amendment No. 1, which only required a good faith negotiation
4 in such an event, would have been less favorable to Samsung.
5 151. Samsung had significant leverage during the negotiations leading up to
6 Amendment No. 1, Trial Tr. at 436:21-438:4, and it is unreasonable to believe that Samsung
7 would have given up rights through Amendment No. 1 that it already had by virtue of the
8 provisions in the SDR/DDR License.
9 152. In addition, Amendment No. 1 demonstrates that when the parties intended
10 to refer to fixed or flat royalty payments, as opposed to royalty rates, they said so. Specifically,
11 Amendment No. 1 modified Samsung’s royalty obligations and provided for the quarterly
12 payment of “a fixed lump sum royalty,” which Samsung would make “in lieu of the royalty and
13 royalty report specified in Section 3 of the Agreement.” See Exh. 4240, ¶¶ 3, 5.
14 153. Rambus signed Amendment No. 1 on July 10, 2001, and Samsung signed
15 on July 18, 2001. See Exh. 4240.
16 154. On March 22, 2005, Rambus terminated Amendment No. 1 upon signing a
17 settlement agreement with Infineon. See Exh. 4265. Ten days thereafter, the relationship
18 between Samsung and Rambus with respect to SDRAM and DDR SDRAM memory devices was
19 again governed by the SDR/DDR License.
20 d. There Is No Readily Ascertainable Royalty Rate Under The Infineon
Settlement Agreement .
21
155. Rambus and Infineon Technologies AG, Infineon Technologies North
22
America Corp. and Infineon Technologies Holding North America Inc. (collectively “Infineon”)
23
signed a Settlement and License Agreement on March 21, 2005 (hereinafter “Infineon Settlement
24
Agreement”). See Exh. 4264.
25
156. The Infineon Settlement Agreement did not specify a royalty rate but
26
instead required Infineon to make quarterly installment payments of fixed amounts or “caps”
27
REDACTED
28
6088127.1 -34- C 05-00334, 05-02298 RMW
1 See Exh. 4264, §§ 6.2-6.4; Trial Tr. at 1001:13-17 (Ira Blumberg testimony that
2 Rambus agreed to pay in installments). These caps were $50 million, $100 million, and $150
3 million. See id. For payments to the first cap, the agreement required that “Infineon shall pay
4 Rambus for each calendar quarter starting October 1, 2005 an amount of five million and eight
5 hundred fifty thousand U.S. dollars (U.S. $5,850,000), up to a cumulative amount not exceeding
6 fifty million U.S. dollars (US $50,000,000) (the ‘First Cap’).” Id. § 6.2.
7 157. The Infineon Settlement Agreement provided, among other things, for a
8 most favored licensee provision. See Exh. 4264, § 2.3. Under that provision, upon certain
9 conditions, Infineon has the right REDACTED
10 REDACTED Id. The most
11 favored licensee provision would only change the amount of the quarterly installments, not the
12 overall $50 million, $100 million, or $150 million lump sum payments owed. Therefore, if the
13 most favored licensee provision were triggered, it would impact how the “installment payments”
14 are spread over time, but not the total amount of payment required. See Trial Tr. at 1001:25-
15 1002:8 (Mr. Blumberg explaining the most favored licensee provision).
16 158. Following the Infineon Settlement Agreement, Rambus filed a Form S-3
17 with the Securities & Exchange Commission on May 11, 2005. See Exh. 4450. Among the risk
18 factors noted in this filing, Rambus stated that it might not succeed in satisfying the requirements
19 under the Infineon Settlement Agreement “that would require Infineon to pay us up to an
20 additional $100 million in royalty payments.” Id. at 8. The fact that Infineon’s cumulative
21 payments could change from $50 million to $100 million, or from $100 million to $150 million,
22 depending on Rambus’s success in licensing other DRAM suppliers, does not render these
23 payments a “royalty rate.”
24 159. Rambus subsequently filed a Form 10-Q with the Securities & Exchange
25 Commission on May 9, 2006. See Exh. 4451. Therein, Rambus noted that “[a]n acquisition of all
26 of Infineon’s DRAM operations could make it more difficult for us to obtain royalty rates we
27 believe are appropriate.” See id. at 35. The fact that the acquisition of Infineon could affect the
28 royalty rates obtained from third-parties does not render Infineon’s lump sum payments a “royalty
6088127.1 -35- C 05-00334, 05-02298 RMW
1 rate.” Nor does the change-of-control provision from the Infineon Settlement Agreement render
2 these payments a “royalty rate.” As described in Rambus’s 10-Q, a successor in interest to
3 Infineon would simply pay a lump sum that was scaled up to account for increased average sales
4 volume. See id. Moreover, the mere fact that someone who was not involved in the negotiation
5 of the SDR/DDR License, and who drafted this filing five years after those negotiations, used the
6 term “Infineon rate” as a shorthand to refer to the lump sum installment payment in the Infineon
7 Settlement Agreement is not probative of the parties’ intent in drafting the language of Section
8 3.8.
9 160. The payments to be made by Infineon under the Infineon Settlement
10 Agreement were not payments based on a percentage of sales or net sales of products by Infineon.
11 Instead, they were installments of an agreed-upon lump sum payment to be made to Rambus of
12 $50 million, $100 million or $150 million. These payments were not royalty rates as that term is
13 used in the SDR/DDR License. Further, as explained below, these payments did not incorporate
14 a “royalty rate,” let alone a set of product-specific royalty rates corresponding to the differing
15 rates set forth in Section 3.1(b) for specific product categories.
16 161. The Infineon Settlement Agreement covered a broader scope of products
17 than the SDR/DDR License. See Exh. 4264. With limited exceptions, Infineon’s licensed
18 products included “any existing or future Infineon Memory ICs, Infineon Memory Portion,
19 Infineon Memory Modules, or Infineon Memory Component.” Exh. 4264, § 1.6 (emphasis
20 added). Samsung was only licensed for the specific products identified in Sections 1.5 through
21 1.10 of the SDR/DDR License. See Exh. 4226.
22 162. The Infineon Settlement Agreement covered additional Rambus patents not
23 licensed to Samsung under the terms of the SDR/DDR License. Under the Infineon settlement,
24 Infineon was licensed to practice “all patents, utility models, and patent applications, in all
25 counties of the world having a first effective filing date, in any country of the world, prior to
26 March 18, 2005.” Exh. 4264, § 1.4. As previously noted, Samsung was only licensed for patent
27 claims covering its licensed products that were commercially available as of the effective date of
28 the SDR/DDR License. See Exh. 4226, § 1.12.
6088127.1 -36- C 05-00334, 05-02298 RMW
1 163. In addition to the monetary lump sum payment, Rambus also received non-
2 monetary consideration in the Infineon Settlement Agreement that has no equivalent in the
3 SDR/DDR License. On March 1, 2005, Rambus’s litigation with Infineon in the Eastern District
4 of Virginia took a “disastrous turn” when Judge Payne stated that he would soon issue written
5 findings that Rambus had committed spoliation. See Order Denying Rambus’s Motion for
6 Summary Judgment on Samsung’s Counterclaims I, II and III (Case Nos. 05-00334-RMW, 05-
7 02298-RMW), at 4 (July 9, 2008). On March 21, 2005, Rambus and Infineon entered into a
8 global settlement dismissing the Infineon litigation and thereby avoiding a possible adverse
9 judgment with potentially far-reaching consequences for Rambus. Indeed, this Court has
10 previously noted that “Rambus settled the Infineon litigation, at least in part, to avoid the risk that
11 Judge Payne’s findings . . . would have collateral estoppel effect” on other litigation with DRAM
12 suppliers. Hynix Semiconductor Inc. v. Rambus Inc., Case No. CV-00-20905, Order Denying
13 Hynix’s Motion to Dismiss Patent Claims for Unclean Hands on the Basis of Collateral Estoppel,
14 at 6 (Apr. 22, 2005). As part of the exchange of consideration that included a lump sum payment,
15 this dismissal and the cross-license of Infineon’s patents, Rambus dismissed Infineon from its
16 infringement and state court antitrust suits, and granted Infineon a broad life-of-the-patent license
17 for its existing patents for virtually any existing or future memory devices. See Exh. 4264, §§
18 2.1, 2.5, 4.1.
19 164. The Infineon Settlement Agreement, including Infineon’s payment
20 obligations thereunder, was irrevocable, with one exception. Reflecting the importance of
21 dismissal of the Eastern District of Virginia litigation as consideration for Rambus’s entering into
22 the Infineon Settlement Agreement, the only circumstance under which the agreement could have
23 been voided was if the District Court had entered binding findings of fact before the parties
24 obtained dismissal of that action. Other than this one circumstance (which did not come to pass),
25 the Agreement provided that “[n]either party may terminate this Agreement for any reason prior
26 to its expiration,” Exh. 4264, § 5.1, which was the “expiration of the last to expire of the License
27 Rambus Patents.” Id. See also Trial Tr. at 1002:9-11 (testimony of Mr. Blumberg) (noting that
28 Infineon could not terminate the agreement before paying the $50 million). In other words,
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1 Infineon was “locked into” the payment obligations set forth in the agreement at the time it was
2 executed. The SDR/DDR License, in contrast, had a five-year term, and was terminable by
3 Samsung on 30 days notice. See Exh. 4226, § 8.1.
4 165. Mr. Shim acknowledged that the terms and scope of the Infineon
5 Settlement Agreement differed so significantly from the SDR/DDR license and that it was not
6 possible to calculate an economic equivalent from Infineon’s fixed payment because “[y]ou can’t
7 compare apples to oranges.” Trial Tr. at 376:19-22, 377:2-10.
8 166. Samsung’s economist agreed. Dr. Ugone testified that you could not
9 derive a single “royalty rate” from the Infineon Settlement Agreement and instead offered a range
10 of weighted averages between .17% and .41%. Trial Tr. at 638:2-12. These hypothetical royalty
11 rates, however, applied to all products licensed under the Infineon Settlement Agreement and
12 were not severable into the discrete product categories licensed to Samsung under the SDR/DDR
13 License. See 636:17-637:1. Dr. Ugone also concluded that, if given the benefit of the Infineon
14 Settlement Agreement, Samsung would be required to make quarterly payments under Section
15 3.8 ranging between $3 million and $13.63 million per quarter, though he was unable to pick a
16 single number within that range. See Trial Tr. at 641:17-642:16.
17 167. Indeed, Dr. Ugone used three inconsistent methodologies to arrive at his
18 hypothetical royalty rates. Dr. Ugone’s range of $3 million to $7 million was calculated by
19 taking the $50 million lump sum payment and dividing it by various estimates of Infineon net
20 sales of SDR and DDR products over various time periods covered by the Infineon Settlement
21 Agreement to arrive at an “effective royalty rate” as a product of net sales. Trial Tr. at 640:12-
22 641:16. This methodology tracked that proposed (but not agreed to) by Mr. Shim in his original
23 proposal for the 2001 Amendment to the SDR/DDR License. Proposed Finding of Fact No. 147.
24 Dr. Ugone’s other opinions, however, took different approaches entirely. Thus, the $5.85 million
25 amount that he testified at trial Samsung should have paid for the second quarter of 2005 was
26 based on his taking the quarterly payment that Infineon paid from the fourth quarter of 2005
27 through the fourth quarter of 2007 (which was simply an installment payment, as noted above,
28 and bore no relation to Infineon’s actual sales), and awarding that quarterly “rate” to Samsung.
6088127.1 -38- C 05-00334, 05-02298 RMW
1 Trial Tr. at 619:12-16. Finally, his $13.63 million amount for the third quarter of 2005 onward
2 under his hypothetical new license was based on taking the $5.85 million quarterly installment
3 payment and “scaling it up” by a factor of 2.33 to reflect Samsung’s higher sales volume relative
4 to Infineon. Trial Tr. at 622:6-623:9.5
5 168. Besides his inability to identify one “rate” from the Infineon Settlement
6 Agreement, Dr. Ugone did not take into account the value of the other consideration that was part
7 of the Infineon settlement, thereby adding further uncertainty to his numbers. Most significantly,
8 in Dr. Ugone’s economic analysis, he failed to account for the substantial value to Rambus of the
9 settlement of the litigation in the Eastern District of Virginia. See Trial Tr. at 632:20-24.
10 169. Further, no “royalty rate” was readily ascertainable by Samsung when it
11 learned of the Infineon Settlement Agreement. The only numbers Samsung proposed to Rambus
12 based on the Infineon Settlement Agreement were those in its June 3, 2005 proposal. See Exh.
13 4273. However, Mr. Shim never explained to Rambus how Samsung calculated the $3.5 million
14 quarterly payment proposal, nor did Mr. Shim explain how a number that was less than Infineon’s
15 quarterly payments for a producer who sells more volume was an equivalent “royalty rate” under
16 Section 3.8. See Trial Tr. 969:16-970:9.
17 e. A Fixed or Flat Quarterly Payment Is Not A “Royalty Rate” Under the
Ordinary Usage of that Term.
18
170. The conduct of the parties demonstrates that the ordinary means of
19
describing fixed or flat quarterly royalty payments is to use the modifier “fixed” or “flat” to
20
describe the payment.
21
171. As Dr. Ugone admitted, he reviewed hundreds of Samsung license
22
23 5
Indeed, the absence of the clearly ascertainable “rate” contemplated by Section 3.8 in the Infineon
24 Settlement Agreement is underscored by Dr. Ugone’s proposing a $5.85 million payment for the second
quarter of 2005. Dr. Ugone derived this figure by simply taking Infineon’s quarterly installment payment
25 under the Infineon Settlement Agreement and applying it to Samsung (notwithstanding the fact that
Infineon itself never made such a payment for the very quarter Dr. Ugone was addressing). In doing so, he
26 departed from the methodology Samsung itself had proposed for addressing non-running royalty payments
in its initial draft of the 2001 Amendment, which was to divide the total amount paid by a licensee by its
27 estimated sales. See Proposed Finding of Fact No. 147. The myriad approaches Samsung has put forward
over time merely confirm that the Infineon Settlement Agreement contains no clearly ascertainable
28 “royalty rate” as contemplated by Section 3.8.
6088127.1 -39- C 05-00334, 05-02298 RMW
1 agreements but he never saw one where the term royalty rate was used to describe a fixed or flat
2 payment without the use of the modifier “fixed” or “flat” to refer to the royalty payments. See
3 Trial Tr. at 657:11-18.
4 172. Even Mr. Shim recognizes that “royalty rate” does not appropriately
5 describe a fixed lump sum quarterly payment. At an August 23, 2005 evidentiary hearing held in
6 the Eastern District of Virginia, Mr. Shim corrected Rambus’s counsel and emphasized that a
7 fixed quarterly payment was not a “rate.” Trial Tr. at 931:7-12. Instead, in discussing Samsung’s
8 proposed fixed quarterly payment of $3.5 million in its June 3, 2005 standstill offer, Mr. Shim
9 described that proposal as being for a “fixed prorated payment.” Id.
10 173. Samsung cites language from two emails written by David Mooring, who
11 had no role in the negotiation of the SDR/DDR License, to support its argument that, at the time
12 of the SDR/DDR License negotiations, Rambus understood that “flat quarterly payment[s]” like
13 those in the Infineon Settlement Agreement would constitute “royalty rates.” See Exhs. 4244 &
14 4245. The Court finds that this evidence does not support such a conclusion.
15 174. As an initial matter, Mr. Mooring wrote these emails to third-parties
16 nVIDIA and ATI in 2004, nearly four years after the negotiation of the SDR/DDR License. They
17 are therefore not relevant to determining the parties’ obligations under the terms of the SDR/DDR
18 License. See Exhs. 4244 & 4245.
19 175. Mr. Mooring also was using the term “royalty” to refer generally to a
20 combination of fixed, quarterly payments and a subsequent running royalty. These emails reflect
21 informal communications that were not drafted with the care, precision or detail that you would
22 expect to find in a formal contract.
23 176. In any event, to the extent that Mr. Mooring was referring to fixed or flat
24 payments he was referring to quarterly payments that “run” with the period of the licensee’s use
25 of the patented technology. Such payments are made during the period of use, and if terminated,
26 the rights to use the technology also terminate. The installment payments of the Infineon
27 Settlement Agreement, in contrast, do not “run” with Infineon’s use rights. To the contrary,
28 Infineon’s rights extend from the execution of the Settlement Agreement until the expiration of
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1 Rambus’s patents, and thus precede and succeed Infineon’s quarterly payments.
2 177. The difference between these two types of payments is thus analogous to
3 the difference between periodic lease payments, which are made during the period of use of the
4 property, and which thus vary or “run” with such use, and installments on a mortgage, which do
5 not in any way relate to the period of ownership, which extends beyond the payment schedule.
6 178. Here, where a lump sum payment does not run with use, the determination
7 of the installment payment is rather arbitrary – payment could be made all at once, or in 2, 4, 6, 8,
8 25, or 50 installments. Because the sum payable is fixed and absolute, the amount paid does not
9 vary based upon how the payments are divided. Thus, it does not make sense to refer to
10 Infineon’s quarterly $5.85 million payment as a royalty “rate,” any more than it would be
11 appropriate to refer to Infineon’s payment of $12.5 million, $25 million, or $50 million as
12 quarterly “rates” had Infineon instead paid the $50 million lump sum in 4, 2, or 1 installment,
13 respectively.
14 179. Therefore, whether the “flat quarterly payment” described in Mr.
15 Mooring’s emails, which runs with the use of the patent rights, would trigger Section 3.8 does not
16 bear on the issue before the Court, namely, whether installment payments on a fixed lump sum
17 required an adjustment of Samsung’s payments under the SDR/DDR License.
18 180. For similar reasons,
19
20 REDACTED
21
22
23
24 REDACTED
25
26
27
28
6088127.1 -41- C 05-00334, 05-02298 RMW
1 4. Section 8.5: The Duty to Negotiate in Good Faith

2 a. The SDR/DDR License Does Not Give Samsung the Right to See the
Infineon Settlement Agreement.
3
181. Samsung’s Second Amended Answer, Affirmative Defenses, and
4
Counterclaims (“SAC”) sets forth the basis for Count II, the alleged violation of Section 8.5. See
5
‘2298 SAC ¶¶ 185-190; ‘334 SAC ¶¶ 213-218. In its pleadings, Samsung alleged that Rambus
6
breached Section 8.5 by failing “to provide notice of certain terms of the Rambus/Infineon license
7
as required under Section 3.8 of the SDR/DDR License….” ‘2298 SAC ¶¶ 187-188; ‘334 SAC
8
¶¶ 215-216.
9
182. Similarly, in Samsung’s Supplemental Objections and Responses to
10
Rambus’s Second Set of Interrogatories, signed on October 31, 2007 and verified by Young Jo
11
Lim on October 30, 2007, Samsung does not set forth any explanation of the alleged violation of
12
Section 8.5 beyond that which is in the SAC. See Samsung’s Supplemental Objections and
13
Responses to Rambus’s Second Set of Interrogatories; Trial Tr. at 936:23-938:16.
14
183. It is undisputed that the SDR/DDR License does not give Samsung the
15
right to audit the terms of third party licenses for purposes of evaluating Samsung’s rights, if any,
16
under Section 3.8. See Exh. 4226; Trial Tr. at 329:20-24, 330:3-14 (Jay Shim confirming that the
17
2000 agreement “did not have any audit right that enabled Samsung to demand to see license
18
agreements Rambus entered into with others.”). Samsung’s right was merely to be notified and
19
automatically given the benefit of any lower royalty rate given to third parties for the products
20
subject to Section 3.8.
21
184. Paragraph 9 of Amendment No. 1 to the SDR/DDR License contains audit
22
rights for Samsung to evaluate third party licenses for purposes of the most favored licensee
23
provision in Paragraph 8 of Amendment No. 1, but this Amendment No. 1 was terminated on
24
March 22, 2005. See Exhs. 4240, 4265.
25
185. Under the terms of the SDR/DDR License, Rambus was not required to
26
provide Samsung a copy of the Infineon Settlement Agreement.
27
28
6088127.1 -42- C 05-00334, 05-02298 RMW
1 b. Section 8.5 Does Not Contain An Automatic Renewal Provision.

2 186. Section 8.5 does not contain any explicit or implicit requirement that the
3 SDR/DDR License be automatically renewed or that a new agreement be signed.
4 187. Section 8.5 is a straightforward provision that requires the parties to
5 negotiate in good faith “with a view to achieving a mutually satisfactory” agreement. See Exh.
6 4226, § 8.5. In the language of the provision, there is no requirement that the parties agree to a
7 renewal or extension of the SDR/DDR License. See Exh. 4226, § 8.5. Specifically, Section 8.5
8 provides:
9 Assuming that this Agreement has not been terminated and that
Samsung is not in breach hereof, the parties shall meet, six (6)
10 months before the expiration of this Agreement, to negotiate in
good faith with a view to achieving a mutually satisfactory patent
11 license agreement under the Rambus Patents with respect to the
Licensed Products, including, without limitation, an extension
12 hereof or a new agreement.
13 Exh. 4226, § 8.5.
14 188. Han Yong Uhm, described by Jay Shim as someone who “worked closely
15 with me on the contract issues and language,” Trial Tr. at 388:16-18, confirmed the common
16 sense reading of the language of Section 8.5. He testified that under Section 8.5, “it doesn’t look
17 as if the contract was supposed to be renewed automatically.” V101 (7/25/08 Depo. of Han Yong
18 Uhm at 55:5-18). Mr. Uhm further explained that he never heard anyone from Rambus agree that
19 “royalty terms would be automatically extended.” Id. at 55:19-56:4.
20 189. Moreover, Samsung’s lead negotiator, Charles Donohoe, confirmed that
21 Section 8.5 does not require automatic renewal on the same terms. Mr. Donohoe testified that
22 Samsung “would not have wanted an exact extension of the agreement” but rather would have
23 “wanted to be able to renegotiate the economic terms of the agreement.” He further explained:
24 “So I don’t think [Samsung] asked for an out and out extension of the agreement.” V103
25 (5/14/08 Depo. of Charles Donohoe at 133:1-11).
26 190. As Samsung’s economist Dr. Ugone explained, economic theory
27 recognizes that “different people can place different views on [the value of an asset]” and “you
28 can have good faith negotiations but not a deal.” Trial Tr. at 647:1-18.
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1 191. Common sense and experience supports this conclusion, namely that
2 parties may often negotiate in good faith without coming to an agreement. Thus, the fact that
3 Samsung and Rambus did not reach agreement on an extension of the SDR/DDR License or on a
4 new agreement does not evidence a breach of the duty to negotiate in good faith.
5 c. There Is No Obligation to Give Samsung Most Favored Licensee
Status Upon Any Renewal or In Any New Agreement.
6
192. Nothing explicit or implicit in Section 8.5 mandates that the only “mutually
7
satisfactory” patent license agreement that the parties could negotiate in good faith would be one
8
that gave Samsung some form of most favored licensee status in a new agreement or extension.
9
See Exh. 4226, § 8.5.
10
193. To the contrary, as the 2000 negotiation history demonstrates, Samsung
11
sought such a provision, but it was not included in the final SDR/DDR License.
12
194. On August 10, 2000, Neil Steinberg sent a draft license agreement to Jay
13
Shim. That draft did not contain any obligation to negotiate a renewal or extension in good faith,
14
or any provision that resembled the final Section 8.5. See Exhs. 4208, 4209.
15
195. On October 6, 2000, Jay Shim sent a proposed term sheet to Neil Steinberg
16
that requested that Mr. Steinberg add a
17
provision in which Rambus agrees that the parties shall negotiate in
18 good faith any extension or renewal terms to the present
Agreement, and that the royalty terms of such extension or renewal
19 terms shall not exceed the present royalty terms. Under such a
provision, the parties may further negotiate in good faith terms
20 relating to any additional patents or licensed products.
21 Exh. 4214 at ¶ 9 (emphasis added). This proposal did not require the parties to agree to a new
22 agreement; it simply provided that any new agreement could not contain royalty terms that
23 exceeded the present royalty terms.
24 196. A few days later, on October 11, 2000, Mr. Steinberg incorporated some
25 but not all of Samsung’s suggested provisions for what became Section 8.5 in the draft
26 agreement. See Exh. 4217 (see red-lines within for October 11, 2000 draft). Specifically, the
27 language in the October 11, 2000 draft said nothing about royalty terms for an extension or
28 renewal not exceeding “the present royalty terms” in Section 3.1 of the license under discussion.
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1 See id.
2 197. On October 16, 2000, Mr. Shim responded with suggested revisions to the
3 October 11, 2000 draft. Mr. Shim copied Charles Donohoe on those communications. Indeed,
4 before sending the October 16 proposed revisions, Mr. Shim consulted with Mr. Donohoe. See
5 V105 (6/9/2008 Depo. of Jay Shim at 205:21-206:6). Mr. Shim asked that Section 3.8, the most
6 favored licensee provision in the draft agreement, be included in the list of provisions that would
7 survive termination or expiration of the agreement. See Exh. 4215 at ¶ 17.
8 198. That same day, Mr. Steinberg responded and refused to include Section 3.8
9 in the list of provisions that would survive termination or expiration of the agreement. See Exh.
10 4216, ¶ 17; see also Exh. 4217, § 8.6 (no revision to include 3.8).
11 199. On October 21, 2000, Mr. Steinberg sent an executed SDR/DDR License
12 to Mr. Shim. See Exh. 4222.
13 200. On October 26, 2000, Mr. Shim sent an email to Mr. Steinberg, in which
14 Mr. Shim requested four changes. Specifically, Mr. Shim requested (1) that the arbitration
15 procedure be removed from the agreement, (2) a “representation” from Mr. Steinberg “that
16 ‘Rambus Patents’ in Section 1.12(i) are intended to cover all Licensed Products and their future
17 parametrically improved versions,” (3) a revision to “8.5 to reflect that in the ‘extension’ or ‘new
18 agreement,’ Samsung is guaranteed to the most favorable royalty condition in the manner
19 afforded in the present agreement,” and (4) that the termination period in Section 8.4 change to
20 thirty days from sixty days for both parties. Exh. 4223.
21 201. The next day, on October 27, 2000, Mr. Steinberg sent a revised, signed
22 SDR/DDR License. Mr. Steinberg stated in his letter that “to the extent possible, we have
23 incorporated your latest requests into the enclosed Agreement.” Exh. 4224 at 2. Mr. Steinberg
24 incorporated two of Mr. Shim’s four suggested revisions. First, the arbitration procedure in
25 Section 9.3 was removed. Compare Exh. 4222, § 9.3 with Exh. 4224 at 26-27. Second, the
26 termination period in Section 8.4 was changed to thirty days from sixty days. Compare Exh.
27 4222, § 8.4 with Exh. 4224, § 8.4. The revised, signed October 27, 2000 document did not
28 incorporate Mr. Shim’s requested changes for Section 1.12(i) or Section 8.5. Specifically, it
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1 made no change to Section 8.5 to provide that in any extension or new agreement, Samsung
2 would be guaranteed any most favorable royalty conditions.
3 202. On October 31, 2000, Mr. Shim called and woke up Mr. Steinberg in the
4 middle of the night. See Exh. 4227. Mr. Shim followed up that phone call with an email to Mr.
5 Steinberg at 1:48 a.m. on October 31, 2000 that said Jon Kang had executed the SDR/DDR
6 License. See id. Moreover, it said: “I’m now working on Section 8.5 (i.e., the most favorable
7 royalty condition in the extension or in new agmt.) wording and will have that for you soon. As
8 you indicated we’ll attach a post-execution amendment to resolve this.” Id.
9 203. The SDR/DDR License was signed by Jon Kang of Samsung on October
10 31, 2000 without modification of Section 8.5. See Exh. 4226. Indeed, the language in Section
11 8.5 in the final SDR/DDR License is the same as the language proposed by Rambus on October
12 11, 2000. Compare Exh. 4217, § 8.5 (no red-line indicates language is same as October 11, 2000
13 draft) with Exh. 4226, § 8.5.
14 204. On November 7, 2000, Mr. Shim sent Mr. Steinberg a draft Amendment A
15 to the SDR/DDR License. See Exh. 4230. Samsung’s draft Amendment A provided that Section
16 8.5 would be amended to add the following language: “Rambus agrees that in such an extension
17 or a new agreement, the royalty rates, such as the ones specified in Section 3.1 herein, or effective
18 royalty rates shall in no event be greater than those agreed to by any other then current or
19 prospective licensees of Rambus for substantially similar categories of licensed products.” Exh.
20 4231. Samsung’s proposal to add this language acknowledges that the provision did not
21 somehow impliedly exist in the existing language.
22 205. On November 21, 2000, Mr. Steinberg replied to Mr. Shim’s November 7,
23 2000 email and said “[a]ttached please find a revised amendment to the Patent License
24 Agreement.” Exh. 4232. In the attached revised amendment, and as noted in the discussion of
25 the DDR2 issue above, Mr. Steinberg proposed different language to be added to Section 8.5:
26 “Rambus agrees that in such an extension or a new agreement, the royalty rates for any category
27 of products corresponding to SDR SDRAM, SDR SGRAM, DDR SDRAM and DDR SGRAM
28 shall not be greater than the royalty rates paid by other current or prospective licensees under the
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1 Rambus Patents for any category of products corresponding to SDR SDRAM, SDR SGRAM,
2 DDR SDRAM, and DDR SGRAM.” Exh. 4233.
3 206. Neither party ever signed either of the proposed amendments to Section 8.5
4 in Exhibits 4231 or 4233. Trial Tr. at 248:19-22. Therefore, those provisions were not
5 incorporated into the SDR/DDR License, which required that any “alteration, amendment,
6 waiver, cancellation or any other change in any term or condition of [the] Agreement . . . have
7 been mutually assented to in writing by both parties.” Exh. 4226, § 10.9.
8 207. At trial, Mr. Shim claimed that the alleged promises in these November
9 2000 amendments were “important” to him in deciding to have Mr. Kang sign the SDR/DDR
10 License. See Trial Tr. at 247:16-248:1. Mr. Shim’s testimony about the so-called importance of
11 an alleged promise by Mr. Steinberg to amend the agreement is confused and not credible. First,
12 if these amendments were of such importance to him, why did Mr. Shim not ensure that an
13 amendment was reduced to writing and signed by the parties? His explanation for not doing so –
14 that “about this time, and for the period of many months that followed, there were some serious
15 concerns as to Rambus’s I.P., and we were reviewing many different aspects of lawsuits that were
16 going on” – makes no sense and undermines Samsung’s position. Not signing the amendment
17 because of uncertainty on Samsung’s side suggests that Samsung made a conscious decision not
18 to sign the amendment due to the uncertainty, which is contrary to any reliance theory. Trial Tr.
19 at 248:24-249:3.
20 208. Mr. Shim’s alternative explanation is equally untenable. Mr. Shim
21 downplayed the failure to execute the November amendment by saying that Samsung eventually
22 executed Amendment No. 1 in July 2001. See id. at 249:4-250:1. If Mr. Shim was suggesting
23 that the July 2001 Amendment No. 1 was in any way a continuation of the November 2000
24 negotiations, his position again is simply not credible. Negotiation of the 2001 Amendment did
25 not commence until more than seven months after Mr. Steinberg sent the revised draft
26 amendment. See Exhs. 9110, 9111 (initial drafts of Amendment No. 1 exchanged on July 6,
27 2001). In sum, there is no clear, credible justification offered by Samsung for why, if these
28 amendments were important to it, that a final version was not negotiated and signed.
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1 209. Moreover, Mr. Shim’s testimony about the importance of these alleged
2 promises is not credible for the further reason that, just months before trial, and after a “day or
3 so” of preparation with counsel where he reviewed “quite a few” documents, Mr. Shim expressly
4 and categorically professed no recollection whatsoever of any effort by him or anyone at
5 Samsung to change Section 8.5 from October 27 through the end of 2000. See V105 (6/9/2008
6 Depo. of Jay Shim at 143:20-144:13, 239:5-10). His trial testimony, in which he professed to
7 recall efforts to change Section 8.5 and that the proposed amendments were important to him is
8 not credible in light of his testimony to the contrary only a few months earlier.6
9 210. In the end, there can be no dispute that the parties did not agree to include
10 an obligation to give Samsung most favored licensee status in any renewal or further agreement
11 after the 2000 SDR/DDR License. Just months after concluding the unsuccessful renewal
12 negotiations, Mr. Shim conceded in an August 2005 evidentiary hearing that Samsung did not
13 have any most favored licensee protection for any extension of the SDR/DDR License or in any
14 new agreement that replaced or followed it, but rather that the most favored licensee provisions of
15 Section 3.8 were limited to the five-year term of the SDR/DDR License. Specifically, Mr. Shim
16 testified that the SDR/DDR License “provided a most favored nations clause while it was in
17 effect, but it did not provide any commitment on Rambus’s part that Samsung would be given a
18
19 6
In Samsung’s Post-Trial Proposed Findings of Fact and Conclusions of Law Regarding Spoliation and
Unclean Hands, filed on October 7, 2008, Samsung makes the remarkable statement that Mr. Shim’s lack
20 of recollection is “not surprising or of any consequence to the issues in dispute.” Post-Trial Proposed
Findings of Fact and Conclusions of Law Regarding Spoliation and Unclean Hands at 118, n.11 (Case No.
21 05-00334, Docket No. 2354; Case No. 05-02298, Docket No. 1223) (Oct. 7, 2008). It is inconceivable
how Samsung can take the position that a promise that was so “important” to Mr. Shim that it apparently
22 led him to agree to sign the SDR/DDR License is at the same time something that is reasonably forgettable
and not “of any consequence to the issues in dispute.” Id. Moreover, with respect to the post-contract
23
amendment negotiation documents that Samsung apparently destroyed, Samsung makes an unsupported
24 and false statement that the post-contract negotiation documents should have been produced to Samsung
prior to Mr. Shim’s deposition. See id. (“It is not clear why Rambus did not produce these documents
25 prior to Mr. Shim’s deposition.”). This is incorrect. The post-contract negotiation documents were
produced to Samsung more than two years before Mr. Shim’s deposition. See Kim Decl., Ex. C at 4
26 (Updated Joint Case Management Statement and Proposed Order, Case No. 05-02298, Docket No. 74
(June 2, 2006)) (stating that “[o]n April 5, 2006, Rambus produced to Samsung all of the non-privileged
27 Rambus documents that it has previously produced in related Case No. 00-20905”); Kim Decl., Ex. B
(Sept. 28, 2005 production letter in Case No. 00-20905 bearing Bates numbers of post-contract negotiation
28 documents between Rambus and Samsung, Exhs. 4230-4233 (R2216041-R2216047)).
6088127.1 -48- C 05-00334, 05-02298 RMW
1 most favored nation clause in a renewal agreement.” He further elaborated that the SDR/DDR
2 License “provided most favored nation during those terms. Obviously, we did not talk about
3 terms of the renewal.” Trial Tr. at 928:21-929:16.
4 d. The SDR/DDR License Did Not Establish Any Terms That Would Be
In An Extension Or A New Agreement
5
211. No provision of the SDR/DDR License describes what provisions will be
6
or must be in any extension or a new agreement to replace or follow the SDR/DDR License. See
7
Exh. 4226.
8
212. Nothing in the SDR/DDR License describes what the term would be of an
9
extension or new agreement. See id.
10
213. Nothing in the SDR/DDR License describes the conditions under which an
11
extension or new agreement could be terminated. See id.
12
214. Nothing in the SDR/DDR License describes whether, under the terms of
13
any extension or a new agreement, Samsung could challenge or participate in a challenge to any
14
of Rambus’s patents and, if so, what the consequences of such a challenge would be. See id.
15
215. Nothing in the SDR/DDR License describes what provisions in an
16
extension or a new agreement would govern resolution of disputes, including in what forum such
17
disputes would be resolved. See id.
18
216. Nothing in the SDR/DDR License describes what the governing law would
19
be in any extension or new agreement. See id.
20
217. Nothing in the SDR/DDR License describes what the audit rights would be
21
in any extension or new agreement. See id.
22
218. Nothing in the SDR/DDR License describes what the penalties for late
23
payment would be in any extension or new agreement. See id.
24
219. Nothing in the SDR/DDR License describes what the change of control
25
provisions, if any, would be in any extension or new agreement. See id.
26
27
28
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1 e. The 2001 Amendment Contained A Provision for Certain Most

Favored Licensee Protections Upon Renewal, But that Provision
2 Disappeared When the Amendment Was Terminated.
3 220. In May 2001, after the adverse verdict in the Infineon litigation, Samsung
4 told Rambus it intended to withhold its first quarter 2001 royalty payments while it evaluated the
5 litigation. See Trial Tr. at 735:15-22; Exhs. 9109, 9112.
6 221. In the following weeks, the parties negotiated Amendment No. 1 to the
7 SDR/DDR License. See Exh. 4240. In Paragraph 8 of Amendment No. 1, Rambus and Samsung
8 agreed as follows:
9 Assuming that the Agreement, as revised herein, has not been
terminated and that Samsung is not in breach thereof, the parties
10 shall meet six (6) months before the expiration of the Agreement, to
negotiate in good faith with a view to achieving a mutually
11 satisfactory patent license agreement under the Rambus Patents
with respect to the Licensed Products, including, without limitation,
12 an extension of the Agreement or a new agreement. Rambus agrees
that in such an extension or a new agreement, the royalty rates for
13 SDR/DDR IC’s and/or SDR/DDR memory modules shall not be
greater than the royalty rates paid by other current or prospective
14 licensees and further shall not be greater than the royalty rate as
specified under Section 3.1 of the Agreement, in the event that
15 Rambus receives a lump sum payment, in lieu of royalties
calculated based on a percentage of Net Sales, on Licensed
16 Products from another licensee prior to termination or expiration of
the Agreement, then the parties agree to negotiate in good faith to
17 modify the payment terms of the Agreement.
18 Exh. 4240, ¶ 8 (emphasis added). The underlined language was added to Paragraph 8 of the 2001
19 Amendment, and is not present in Section 8.5 of the SDR/DDR License. Compare Exh. 4226, §
20 8.5, with Exh. 4240, ¶ 8. The addition of this language reflects that an obligation to agree to most
21 favored licensee rates is not implicit in the duty to negotiate in good faith, or else the additional
22 language would be mere surplusage.
23 222. Although the parties modified the most favored licensee provision for the
24 term of the Amendment, they did not amend the language of Section 8.5 of the SDR/DDR
25 License.
26 223. On March 22, 2005, Rambus terminated Amendment No. 1. See Exh.
27 4265. Ten days thereafter, the governing agreement was again the SDR/DDR License.
28
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1 D. Samsung Was in Breach Of The SDR/DDR License Because It Failed To Comply

With Its Royalty Audit Obligations
2
224. In the SDR/DDR License, the parties included a provision that entitles
3
Rambus to perform royalty audits of Samsung on a periodic basis. Exh. 4226, § 4.1. The
4
SDR/DDR License provides that the royalty audit is to be conducted by a “designated
5
independent accounting or licensing audit firm” selected by Rambus. Id. The auditor “shall have
6
the right to examine and audit . . all such records . . . and accounts as may contain, under
7
recognized accounting practices, information bearing upon the amount of royalties payable to
8
Rambus under the Agreement.” Id.
9
225. In December 2003, Rambus notified Samsung that Rambus would be
10
conducting a royalty audit pursuant to Section 4.1. Trial Tr. at 256:6-14. The purpose of the
11
audit was to determine whether Samsung was in compliance with its royalty payment obligations
12
under the SDR/DDR License. Trial Tr. at 857:25-858:4.
13
226. Rambus selected Ernst & Young LLP (“E&Y”) and Nigel Shepherd, an
14
E&Y partner with more than ten years of royalty audit experience, to conduct the audit. Exh.
15
10064; Trial Tr. at 857:17-24, 874:6-9. Mr. Shepherd was the lead partner on the royalty audit,
16
and in that capacity was responsible for designing the audit, managing field auditors, coordinating
17
with Samsung to obtain information needed for the audit, and communicating with Rambus about
18
the status of the audit. Trial Tr. at 858:5-20. In addition to these responsibilities, Mr. Shepherd
19
intended to issue a report with findings about Samsung’s royalty payments after receiving and
20
reviewing audit information sufficient for E&Y to determine whether Samsung was in
21
compliance with its payment obligations. Trial Tr. at 858:5-14, 882:14-17.
22
227. Although the audit was originally scheduled to be completed by March 31,
23
2004, within four months of Rambus’s request for the audit, E&Y was unable to complete the
24
audit by that date because Samsung refused to provide the auditors basic information needed to
25
evaluate the accuracy of Samsung’s royalty payments. Trial Tr. at 858:24-859:5, 860:3-860:9;
26
see also Exh. 10127 (3/31/04 email from Nigel Shepherd to Kim Koran of Rambus and Jay Shim
27
of Samsung); Trial Tr. at 343:20-345:10. E&Y nevertheless continued to seek the information
28
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1 needed to complete the audit throughout the rest of 2004. Trial Tr. at 860:10-14.
2 228. Despite these efforts, E&Y was not able to complete the audit and
3 determine the accuracy of Samsung’s royalty payments because Samsung remained unwilling to
4 provide E&Y the financial information needed for this purpose. Trial Tr. at 860:3-9, 877:4-
5 877:9; see also Exh. 10260. The most significant information that Samsung was unwilling to
6 provide generally fell into three categories.
7 229. First, Samsung failed to provide E&Y product information that would
8 enable E&Y to determine whether Samsung was properly identifying all of the Samsung products
9 for which Samsung was required to pay royalties. Trial Tr. at 861:3-6, 862:20-863:4. On April 1,
10 2004, after E&Y had failed in its efforts over several months to obtain needed product
11 information, Mr. Shim agreed to resolve the impasse by promising to deliver a complete list of
12 Samsung’s products from its semiconductor division to Rambus and to have Rambus and
13 Samsung’s engineers work together to identify the royalty-bearing products. Trial Tr. at 863:20-
14 865:19. This commitment was memorialized in an April 1, 2004 email from Mr. Shepherd to Mr.
15 Shim and a responsive email on April 22, 2004 from Mr. Shim to Mr. Shepherd. Exhs. 10129,
16 10148; see also Trial Tr. at 345:16-23, 346:13-347:6, 348:24-349:5, 350:19-351:9, 863:22-
17 865:19. Samsung, however, did not deliver the promised product list, and the meeting between
18 the parties’ engineers did not occur. Trial Tr. at 865:20-22, 869:19-870:10; Exh. 10260. Instead,
19 after eight more months of delay, Samsung allowed an E&Y field auditor to come on-site at
20 Samsung for one day only to review (but not copy) a hard-copy product list that exceeded 100
21 pages in length and did not include product code and product numbering information necessary
22 for a proper product sampling and testing. Trial Tr. at 866:5-15; Exh. 10260; see also Trial Tr. at
23 898:24-899:22, 901:15-902:2, 905:8-909:1 (foundation testimony regarding Exh. 10260). This
24 product disclosure was insufficient for E&Y to be able to determine whether Samsung was
25 properly identifying the complete set of products for which it owed Rambus royalties. Trial Tr.
26 at 862:20-863:4, 870:7-10, 877:4-9; see also Exh. 10260 (point 1).
27 230. Second, Samsung refused to provide any information at all for the period of
28 the fourth quarter of 2000 (“Q4 2000”). Trial Tr. at 863:9-14, 876:4-7; Exh. 10260. The Q4
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1 2000 period was a particularly important one for auditing purposes because, during that quarter,
2 Samsung was required to pay a running royalty rate on all memory products covered by the
3 SDR/DDR License. Trial Tr. at 342:12-17. For later periods, as a result of the 2001 Amendment,
4 Samsung’s running royalty payments were limited to controllers. Mr. Shepherd informed
5 Samsung that the auditors needed Q4 2000 data at one of the initial kick-off meetings on
6 February 15, 2004, and at that time Samsung did not object to the request. Trial Tr. at 870:11-22,
7 871:13-872:10. However, when the data was not made available during the initial months of the
8 audit, E&Y renewed its requests for Q4 2000 data in multiple conference calls in July and
9 November of 2004. Trial Tr. at 872:11-873:11. During the November 2004 conference call,
10 Samsung again promised to supply Q4 2000 data, and Mr. Shepherd memorialized this promise in
11 a contemporaneous memo summarizing the call. Trial Tr. at 873:12-876:3; Exh. 10228; see also
12 Exh. 10260. Samsung, however, never provided this information to E&Y and never provided any
13 justification for its failure to do so. Trial Tr. at 876:4-877:3; Exh. 10260. As a result, E&Y had
14 no way to determine the accuracy of Samsung’s royalty payments for the Q4 2000 period. Trial
15 Tr. at 877:4-9.
16 231. Third, Samsung failed to provide sufficient information for Samsung to test
17 the accuracy of the deductions that Samsung had taken from gross sales. Trial Tr. at 863:5-8; see
18 also Exh. 10228 at p. 2 (“Deductions Against Sales”); Exh. 10260 (Point 4). The accuracy of
19 these deductions was important because Samsung’s running royalty rates are applied to a “net
20 sales” figure that is derived by subtracting certain authorized expenses from gross sales. Exh.
21 4226, § 3.1(b); see also id. at § 1.13 (defining permitted deductions). Under the SDR/DDR
22 License, “Net Sales” is defined as “the gross amount invoiced” by Samsung to a customer, “less
23 separately stated charges for insurance, handling, duty, freight and taxes.” Exh. 4226, § 1.13
24 (emphasis added). The limited information that E&Y received indicated that there were serious
25 problems with Samsung’s treatment of deductions, including Samsung’s use of an “allocation
26 method” to deduct purported expenses that were not separately stated on invoices to Samsung’s
27 customers. See Exh. 10228 at 2 (“Deductions Against Sales”); Exh. 10260 (Point 4). Based on
28 the contractual definition of “Net Sales,” E&Y believed that this allocation methodology was
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1 improper. See Exh. 10260 (Point 4.b); Exh. 10228 at 2.

2 232. Samsung has not brought forth any evidence to rebut the evidence
3 discussed above demonstrating that E&Y repeatedly sought, and was denied, key information
4 needed to complete the audit in the three categories identified above. The only witness Samsung
5 called on audit issues, Mr. Shim, testified that he did not know whether Samsung had provided
6 the information that E&Y required. Trial Tr. at 342:18-343:12, 348:5-9, 348:17-22. Although
7 Mr. Shim testified that he was kept informed about the status of the audit by a Samsung
8 accounting employee named Gil-Young Heo, Trial Tr. at 285:22-286:1, Samsung opted not to
9 call Mr. Heo.
10 233. Samsung instead argues only that Samsung had no reason to believe that
11 there remained any problems with the audit after mid-January 2005 because Mr. Shim had been
12 informed by Mr. Heo that the Korean field auditors purportedly had verbally told Mr. Heo that
13 there were no problems with the audit. Trial Tr. at 285:7-286:3.
14 234. Mr. Shim’s contention that he relied upon this purported representation and
15 thus had no basis to believe there were any problems with the audit is belied by evidence
16 demonstrating that Rambus notified Mr. Shim that problems remained with the audit on at least
17 two occasions after mid-January 2005. On February 11, 2005, Rambus General Counsel John
18 Danforth sent Mr. Shim two emails informing him that Samsung’s non-compliance with the
19 royalty audit continued to remain at issue. In the first email, Mr. Danforth told Mr. Shim that
20 Rambus is “eager to resolve the issues we have raised with you starting last summer and in the
21 last meeting in Seoul including – but not limited to – the audit and DDR2 issues.” Exh. 10963.
22 And in a follow-up email on the same day, Mr. Danforth elaborated on his desire to resolve the
23 outstanding issues with the audit, stating that:
24 I am hopeful that your side, in turn, have now reviewed the
background of the various issues (DDR2, audit, SCO, DDR1,
25 renewal, etc.) and will, with that background work already done,
now be able to respond very swiftly so our companies can get these
26 issues behind us.
27 Id (emphasis added).
28 235. Mr. Blumberg further informed Samsung that the problems with the audit
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1 remained uncured in his April 1, 2005 letter to Mr. Shim. Exh. 4268. In the letter, Mr. Blumberg
2 reminded Mr. Shim that there were “audit issues” that continued to be the subject of discussions
3 between the parties and further stated: “As you recall, there are ongoing accounting issues that we
4 have notified you constitute an uncured breach of the Agreement . . . .” Id. Mr. Shim testified
5 that he did not agree with Rambus’s position, but he acknowledged that he received the letter and
6 that the letter informed him that Rambus believed there was an uncured breach of the audit as of
7 April 1, 2005. Trial Tr. at 314:15-316:12.
8 236. Rambus, moreover, had made Samsung well aware of the specific ways in
9 which Samsung had failed to comply with its royalty audit obligations. On July 9, 2004, Rambus
10 held a meeting in Korea with Samsung in which it detailed the various ways in which Samsung
11 had failed to comply with the audit, including Samsung’s failure to provide any Q4 2000 data, its
12 failure to provide a proper product list, and its failure to provide sufficient information to support
13 its deductions from gross sales. See Exh. 4251 (July 9, 2004 Samsung-Rambus Legal Update) at
14 Slides 11-14; Trial Tr. at 258:4-18. These are the same fundamental problems that E&Y lead
15 auditor Nigel Shepherd testified were never resolved by Samsung despite repeated efforts to
16 resolve them made by him and his audit team. Trial Tr. at 861:7-8, 862:20-863:14. Rambus,
17 moreover, informed Samsung at the July 9, 2004 meeting that this non-compliance constituted a
18 “breach” of the SDR/DDR License, and reiterated that position in later communications,
19 including in the April 1, 2005 letter, where Mr. Blumberg informed Mr. Shim that the “breach”
20 remained “uncured.” Exh. 4268.
21 237. The Court finds that, by refusing to provide any Q4 2000 data and refusing
22 to provide information about Samsung’s products and deductions necessary for E&Y to verify
23 Samsung’s royalty payments and complete the audit, Samsung violated the provision in Section
24 4.1 of the SDR/DDR License requiring Samsung to give auditors access to “all such records . . .
25 as may contain . . . information bearing upon the amount of royalties payable to Rambus under
26 this Agreement.” Exh. 4226, § 4.1. Samsung was in breach of this provision on or before July 9,
27 2004, and despite repeated warnings from Rambus, failed to cure this breach at any time between
28 that date and June 6, 2005, when Rambus terminated the License.
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1 E. Rambus’s Good Faith Renewal Negotiations in 2004 and 2005

2 1. Renewal Negotiations Began in 2004
3 238. By at least July 2004, Rambus pressed Samsung to begin renewal
4 negotiations for a license that would replace or follow the expiration of the SDR/DDR License.
5 239. As noted above, Samsung and Rambus met on July 9, 2004 in Korea.
6 Rambus’s attendees included Ira Blumberg, Jared Smith, John Danforth, and Joe Moniz.
7 Samsung’s attendees included Jay Shim and some of his associates. See Trial Tr. at 259:3-17,
8 945:22-946:6.
9 240. Rambus presented a PowerPoint presentation to Mr. Shim and the other
10 Samsung attendees at this July 9, 2004 meeting. See Trial Tr. at 258:15-18; Exh. 4251.
11 241. Rambus presented its position on why the SDR/DDR License did not cover
12 DDR2. See Trial Tr. at 946:7-16. Rambus set forth in detail its explanation of the contractual
13 language in Sections 1.7 and 1.12 of the SDR/DDR License and why the language did not cover
14 DDR2 and subsequent generation products. See Exh. 4251 at 46-49. Ira Blumberg, Vice
15 President of Licensing for Rambus and the lead negotiator for Rambus on the renewal agreement,
16 invited Samsung to respond at the meeting with its position on DDR2. See id. at 45; see also
17 Trial Tr. at 946:17-20, 950:11-12. However, Mr. Shim did not offer any explanation based on the
18 contract language or any other documents to show why DDR2 and subsequent generation
19 products were covered by the agreement. See Trial Tr. at 947:1-14.
20 242. Mr. Blumberg encouraged Mr. Shim to begin renewal negotiations because
21 the SDR/DDR License and its Amendment No. 1 were set to expire in 2005. Mr. Blumberg
22 testified that “as early as that July 9th 2004 meeting,” he “mentioned to Mr. Shim my concern
23 that renewal negotiations for agreements of this complexity typically took a significant amount of
24 time and suggested that we begin discussions of that renewal as quickly as possible to ensure that
25 we didn’t run out of time to renew the agreement before the 2000 agreement expired.” Trial Tr.
26 at 950:25-953:6.
27 243. In response to Mr. Blumberg’s desire to get the renewal negotiations
28 started in 2004, Mr. Shim’s position was that there was “no need to rush.” Mr. Shim told Mr.
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1 Blumberg that it was premature to begin negotiations because those negotiations were not
2 required until six months before the expiration of the agreement, and Mr. Shim’s interpretation of
3 Amendment No. 1 was that it did not expire until October 2005. See Trial Tr. at 951:13-952:21.
4 In response, Mr. Blumberg tried to encourage Mr. Shim to negotiate because Mr. Blumberg
5 “[felt] strongly that it was going to take more than six months to negotiate a renewal.” Id. at
6 953:1-4.
7 244. Thus, there is no dispute that Rambus sought to initiate renewal
8 negotiations as early as July 9, 2004.
9 245. Indeed, Mr. Shim acknowledged in 2005 that renewal negotiations between
10 Rambus and Samsung did begin in 2004, despite his reluctance to negotiate. See Trial Tr. at
11 929:17-930:5 (Mr. Shim’s prior testimony from August 23, 2005).
12 2. Rambus’s February 20, 2005 Renewal Offer
13 246. From July 9, 2004 to February 20, 2005, Mr. Blumberg continued to press
14 Mr. Shim to begin renewal negotiations. See Trial Tr. at 950:25-953:6.
15 247. On February 20, 2005, Mr. Blumberg sent an offer for renewal to Mr.
16 Shim. See Trial Tr. at 950:13-22; see also Exh. 4263 (hereinafter the “February 20 Offer”).
17 248. Rambus’s February 20 Offer to Samsung proposed that Samsung make
18 fixed quarterly payments of $12 million in return for a license covering “all forms of DRAM,
19 current and future.” The offer contained a trigger that would move the fixed quarterly payments
20 to a “market rate once at least one other major DRAM manufacturer is paying such market rates.”
21 Exh. 4263.
22 249. Mr. Shim testified that he did not “have a chance” to respond to the
23 February 20 Offer. See Trial Tr. at 289:21-24 (“I did not get a chance to address this proposal”),
24 320:2-4 (“I don’t think I ever had a chance to respond to this proposal”), 333:21-23 (“We never
25 got a chance to respond to that.”).
26 250. Mr. Shim’s repeated testimony that he “did not have a chance to respond”
27 is not credible. Mr. Shim had more than two weeks to consider the February 20 Offer before he
28 met in person with Mr. Blumberg, Mr. Danforth, and Mr. Smith on March 8, 2008 at Rambus’s
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1 offices in Los Altos, California. See Trial Tr. at 953:14-22. Then, at the March 8 meeting, Mr.
2 Shim had further opportunity to discuss, consider, and evaluate the February 20 Offer. At this
3 March 8 meeting, Rambus orally presented its February 20 Offer. See Trial Tr. at 953:23-954:3.
4 In response, Mr. Shim said “it was too early to get into hard core renewal negotiations as we were
5 still well beyond the six-month period before the end of October.”7 Id. at 954:6-10. Mr.
6 Blumberg explained to Mr. Shim that it was a “sweetheart deal” compared to the amount that
7 Samsung would owe going forward under the running royalty rates in Section 3.1 of the
8 SDR/DDR License, and Mr. Blumberg explained to Mr. Shim that the February 20 Offer was
9 time-sensitive and would be withdrawn if Rambus settled the ongoing litigation with Infineon.
10 See id. at 954:17-956:1. Specifically, Mr. Blumberg testified that “I made it clear that this offer
11 was only good until such time as the Infineon settlement occurred.” Id. at 955:24-956:1.
12 251. Mr. Blumberg explained to Mr. Shim why the February 20 Offer was only
13 good up to the time of any settlement with Infineon. Specifically, Mr. Blumberg explained that
14 Rambus was in a trial with Infineon that was expected to finish at the end of March, that there
15 was a possibility Rambus would lose its trial with Infineon, and Rambus would be willing to
16 appeal the Infineon loss if it had an agreement in place with Samsung. See Trial Tr. at 955:7-
17 956:1. However, Mr. Blumberg told Mr. Shim that if the Samsung agreement was not in place,
18 then Rambus was likely to settle with Infineon, “in which case Rambus would no longer see a
19 value to offering a sweetheart deal to Samsung.” Id. at 955:19-23.
20 3. Samsung Learned The Terms of the Infineon Settlement Agreement
21 252. On March 21, 2005, Rambus and Infineon signed a settlement agreement.
22 See Exh. 4264.
23
24 7
Mr. Shim had taken the position that Amendment No. 1 did not expire until October 2005 due to an error
25 in the Amendment that confused the signing date of the SDR/DDR License (October 2000) with the
effective date of the SDR/DDR License (July 2000). Mr. Shim told Mr. Blumberg that any negotiations
26 before six months prior to October 2000 (i.e., March 2005) would be premature. In response, Mr.
Blumberg had taken the position that renewal negotiations could be complex so it was in both parties’ best
27 interest to get started before six months prior to expiration and, in any event, the October 2005 expiration
date was an error by the drafters of the Amendment, and the underlying SDR/DDR License expired on
28 June 30, 2005. See Trial Tr. at 951:3-953:6, 953:25-954:14.
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1 253. On March 22, 2005, Mr. Blumberg sent a facsimile to Mr. Shim informing
2 him of the settlement and attaching a copy of a press release containing certain information. See
3 Exh. 4265. Mr. Blumberg’s March 22, 2005 letter also gave notice that Rambus was terminating
4 the 2001 Amendment. See id.
5 254. On March 24, 2005, Mr. Shim wrote to Mr. Blumberg and requested a
6 copy of the Infineon Settlement Agreement. See Exh. 4267.
7 255. Mr. Blumberg was unable to provide Mr. Shim a copy of the Infineon
8 Settlement Agreement due to Rambus’s confidentiality obligations to Infineon. See Trial Tr. at
9 957:7-10; see also Exh. 4264 (Infineon Settlement Agreement ¶ 12.3). Mr. Blumberg explained
10 to Mr. Shim this restriction on his ability to share the agreement. See Trial Tr. at 957:7-10; see
11 also Exh. 4268 at 1 (“Since these agreements are confidential, I cannot disclose any such
12 agreement to you as you have requested.”).
13 256. However, in addition to sending Mr. Shim the press release describing the
14 Infineon settlement, Mr. Blumberg did answer Mr. Shim’s questions about the Infineon
15 Settlement Agreement in 2005 after the agreement was signed. Trial Tr. at 957:11-17.
16 257. In addition, Mr. Shim had a copy of the redacted Infineon Settlement
17 Agreement that was publicly available through Rambus’s Securities and Exchange Commission
18 (“SEC”) filing in 2005. See Trial Tr. at 312:20-23 (Mr. Shim’s testimony that he saw the
19 redacted copy of the Infineon agreement field with the SEC); Trial Tr. at 957:18-958:18 (Mr.
20 Blumberg’s testimony identifying Exhibit 10324A as the redacted agreement in the SEC filing);
21 Exh. 10324A.
22 258. The publicly available information about the Infineon settlement disclosed
23 the term of Infineon’s license, the fact that neither party could terminate the license for any reason
24 prior to its expiration, the dismissal of litigation between the parties, the amount of the three
25 payment caps, the amount of the quarterly payments, the scope of the patents covered, the scope
26 of the products licensed, and the confidentiality obligations under the agreement. See Exh.
27 10324A.
28 259. Samsung’s economist Keith Ugone testified that he got all the information
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1 he needed to do his analysis of the Infineon agreement from the public information available in
2 the SEC filing and the press release. See Trial Tr. at 629:13-630:1.
3 4. Rambus Continued Renewal Negotiations In Good Faith After the Infineon
Settlement Agreement
4
260. On April 1, 2005, nearly six weeks after sending Mr. Shim the February 20
5
Offer, and nearly two weeks after signing the Infineon Settlement Agreement, Mr. Blumberg
6
wrote to Mr. Shim and withdrew Rambus’s February 20 Offer. See Exh. 4268. As Mr. Blumberg
7
had explained to Mr. Shim at the March 8, 2005 meeting in Los Altos, California (Trial Tr. at
8
955:24-956:1), Rambus did not intend to continue to offer the “sweetheart” terms of the February
9
20 Offer after settlement with Infineon.
10
261. Mr. Blumberg explained to Mr. Shim: “…I believe it would be in the best
11
interest of both our companies to initiate substantive discussions regarding renewal and expansion
12
of license coverage as soon as possible.” Exh. 4268 at 2. Further, Mr. Blumberg told Mr. Shim
13
that he would be in Tokyo the week of April 5-9 and if “you are available in Tokyo during that
14
time, I would be happy to arrange my schedule to meet with you.” Exh. 4268 at 2.
15
262. Mr. Blumberg and Mr. Smith met with Mr. Shim on April 7, 2005 at a
16
coffee shop at the Grand Hyatt in Tokyo. The “primary focus of Mr. Shim’s interest in the
17
meeting” was “discussing and getting more details about the Infineon agreement.” Trial Tr. at
18
960:8-12. During that meeting, Mr. Blumberg told Mr. Shim that “the Infineon agreement
19
involved a lump sum payment and that there was no royalty rate that would be comparable in any
20
way or that would trigger Section 3.8 of that 2000 agreement.” Trial Tr. at 961:2-6.
21
263. At the April 7, 2005 meeting, Mr. Shim did not make any proposal of any
22
kind. See Trial Tr. at 961:15-16 . Mr. Shim’s contrary testimony at trial about the April 2005
23
meeting in Tokyo was not credible and raised serious concerns regarding the propriety of his
24
actions during trial. On direct examination on September 23, 2005, Mr. Shim testified that he did
25
not recall any specific terms being discussed at the April 2005 meeting in Tokyo. See Trial Tr. at
26
330:15-24. The next day, on re-direct, he testified that at the April 2005 meeting in Tokyo,
27
Samsung made a renewal proposal with terms “consistent with what was in place for Infineon”
28
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1 including coverage of all patents and all DRAM products, a five year capture period, and “some
2 scale version of Infineon royalty rate.” See id. at 447:4-448:17. When confronted with how he
3 could recall specific terms of a Samsung proposal on September 24 after not recalling any of
4 those terms on September 23, Mr. Shim testified that he reviewed “my notes about those
5 meetings” overnight while he was still on cross-examination. See Trial Tr. at 456:14-17, 459:4-
6 460:6. The record at trial establishes that Mr. Shim reviewed certain meeting minutes (Exhibits
7 4270, 4272, and 4274) in order to refresh his recollection, none of which relate to the April 2005
8 meeting in Tokyo. Exhibit 4270 had been offered into evidence the preceding day by Samsung,
9 but was then withdrawn after the Court cautioned Samsung about potentially inconsistent
10 positions on the applicability of attorney-client privilege to meeting minutes. See Trial Tr. at
11 295:17-297:12. Despite his newly and improperly refreshed recollection on re-direct, when asked
12 how much money Samsung offered in this meeting on re-cross, Mr. Shim reverted back to “I
13 don’t recall.” Trial Tr. at 454:23-455:1.
14 264. On May 11, 2005, the parties met in Tokyo at Samsung’s offices. See Trial
15 Tr. at 961:17-21. Mr. Blumberg and Mr. Smith attended on behalf of Rambus. See id. at 962:19-
16 21. At this meeting, Mr. Shim suggested some “high-level terms” that Samsung thought “would
17 have to be included in a renewal.” Id. at 962:22-963:12. Mr. Shim did not propose any price
18 terms other than to say that price needed to be “in line with the Infineon deal.” Id. at 963:13-21.
19 Mr. Shim did not “go into any details about what in line meant or in that neighborhood might
20 have been.” Id. In fact, Mr. Shim did not mention any numbers of any kind. See id. at 963:22-
21 23. In response to these high level terms from Mr. Shim, Mr. Blumberg explained that a broad
22 license such as that requested by Mr. Shim would be difficult for Rambus, but that “it was a
23 possibility if we could agree on a reasonable price for such a license.” Id. at 963:24-964:6.
24 265. At the April 7, 2005 or the May 11, 2005 meeting, Mr. Blumberg told Mr.
25 Shim that Rambus would be happy to continue with the terms of the original SDR/DDR License
26 in a renewal. See Trial Tr. at 1012:25-1013:11.
27 266. On May 18, 2005, Mr. Blumberg sent a further proposal to Mr. Shim. In
28 this proposal, Mr. Blumberg explained that based on recent events related to the DOJ
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1 investigation of Samsung for price-fixing, the parties’ discussions to date, and the “very short
2 time available to us to conclude a deal,” Rambus had “determined that we cannot reach, on
3 agreeable terms, the five year patent license renewal deal you desire.” Exh. 4271. Instead, Mr.
4 Blumberg proposed that “we focus on one of the options we have already discussed, namely, a
5 one year standstill agreement between the parties.” Id. He reiterated that “[c]onclusion of such
6 an agreement before July 1 remains a top priority for Rambus.” Id. Then, Mr. Blumberg set forth
7 a series of specific terms for a one year standstill, with price terms that would provide Samsung
8 “the prorated amount paid for such quarter by Infineon…multiplied by the ratio of Samsung’s
9 DRAM revenue for such quarter compared to Infineon’s DRAM revenue for such quarter.” Id.
10 This amount paid under the standstill was to be a credit against royalties owed for Samsung’s
11 DRAM sales during the standstill period once the parties had negotiated a new license. See id.
12 267. Mr. Blumberg testified that at the time he sent the May 18, 2005 standstill
13 proposal, the parties had been discussing the possibility of (a) doing a renewal based on the 2000
14 SDR/DDR License, (b) doing a renewal based on the terms that Samsung had requested, provided
15 that the price was mutually agreeable, or (c ) entering into a standstill. He explained that any one
16 of those three options would have been acceptable to Rambus. See Trial Tr. at 1045:21-1046:5.
17 268. In the May 18, 2005 standstill proposal, Mr. Blumberg stated that he was
18 looking forward to discussing the proposal with Mr. Shim on May 24, 2005. See Exh. 4271.
19 269. On May 24, 2005, Mr. Blumberg, Mr. Smith, and Mr. Danforth met with
20 Mr. Shim and his team at Rambus’s offices in Los Altos, California. See Trial Tr. at 964:19-
21 965:3. The purpose of the meeting was to get Samsung’s feedback on the May 18 proposal and to
22 “move forward on renegotiating a standstill agreement.” Trial Tr. at 965:6-9. Mr. Blumberg told
23 Mr. Shim why he proposed a standstill rather than a renewal. See Trial Tr. at 965:10-966:17
24 (explaining that because Samsung had uncertainty about the enforceability of Rambus’s patents
25 and because Samsung appeared unwilling to pay a significant amount of money for a renewal, a
26 standstill made sense because it allowed the parties more time to assess the uncertainties and
27 “more time to negotiate comfortably a full renewal agreement”). In response, Mr. Shim agreed
28 that the parties “did not seem to be converging on a renewal deal” and was “open to the
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1 discussion of the standstill.” Id. at 966:18-22. However, at no point during the May 24, 2005
2 meeting did Mr. Shim tell Rambus what price Samsung would be willing to pay for a standstill or
3 a renewal. See Trial Tr. at 966:23-967:9.
4 270. During both the May 11, 2005 and May 24, 2005 meetings, there was
5 discussion of Rambus’s concern about Samsung’s potential involvement in antitrust violations.
6 See Trial Tr. at 967:10-13. This issue was also mentioned in Mr. Blumberg’s May 18 standstill
7 offer. See Exh. 4271. Mr. Blumberg explained that the antitrust issues came up because
8 “Samsung had indicated [in the renewal negotiations] that it would require a full release of all
9 past liability, including all antitrust liability in the renewal agreement.” Trial Tr. at 967:16-20.
10 Mr. Shim confirms this. See Trial Tr. at 331:19-332:6. Mr. Blumberg elaborated that “in order to
11 evaluate and properly value the antitrust release, [Rambus] needed to discuss this [antitrust]
12 evidence and those issues with Samsung.” Trial Tr. at 968:4-6.
13 271. Throughout the negotiations, Mr. Blumberg “kept telling Mr. Shim I
14 wanted to engage in negotiations to get that deal done. I thought the relationship between the
15 companies was an important one for both companies and I didn’t want the lack of this agreement
16 to be an impediment to that relationship.” Trial Tr. at 1044:10-22. Further, Mr. Blumberg
17 testified that “at every opportunity, I encouraged Mr. Shim to engage with me in negotiations for
18 a renewal because, among other things, that was one of the main focuses of my job.” Id. at
19 1044:23-1045:1.
20 272. On June 3, 2005, Mr. Shim sent Mr. Blumberg Samsung’s standstill offer.
21 See Exh. 4273; Trial Tr. at 968:10-13.
22 273. Samsung’s June 3 standstill offer proposed a $3.5 million payment for the
23 second quarter of 2005, and $3.5 million per quarter payments for the one-year standstill. See
24 Exh. 4273, §§ 4, 7. It proposed that the parties would negotiate a five-year renewal in good faith
25 no later than the start of the fourth quarter of 2005. See id. at § 5. For that renewal agreement to
26 be negotiated, the term would be no less than five years with the royalty paid in unspecified
27 “fixed quarterly payments,” the covered products would include all DRAM, including DDR2+
28 and XDR, all Rambus patents would be covered, and there would be a $200 million cap on any
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1 payments. See id. at §§ 8-8.4. Samsung’s June 3 proposal had a most favored licensee provision
2 that provided Samsung’s royalty “under the Renewal Agreement will be effectively less than that
3 of any other future Rambus licensees” and Samsung will get “the right to audit future third party
4 license agreements and replace financial terms of the Renewal Agreement with those provided in
5 any future third party license.” Id. at § 9. The June 3 proposal also suggested that if any one
6 Rambus patent was ruled unenforceable by any court, regardless of whether the ruling was final
7 or later overturned on appeal, Samsung would get the option to terminate the renewal agreement
8 and then all sales of Licensed Products prior to termination would be deemed licensed and paid in
9 full. See id. at § 10. Mr. Blumberg testified that Paragraph 10 “shocked” him and was
10 “particularly troubling” because it seemed “incredibly one-sided.” See Trial Tr. at 1050:15-
11 1051:9.
12 274. The parties met again on June 6, 2005 in Santa Clara, California. See Trial
13 Tr. at 968:16-23. Mr. Blumberg, Mr. Danforth, and Mr. Smith attended on behalf of Rambus and
14 Mr. Shim and some of his associates attended on behalf of Samsung. See id. at 968:24-969:3. At
15 that meeting, Mr. Shim explained his June 3 proposal, but never provided calculations or numbers
16 to explain how he derived the $3.5 million per quarter payment proposal or the $3.5 million
17 proposal for the second quarter of 2005. See Trial Tr. at 969:9-971:18. Instead, Mr. Shim spoke
18 only in high level terms, stating that “due to the uncertainty of the value of Rambus’s patents,
19 Samsung was not comfortable paying more than that amount.” Id. In response, Mr. Blumberg
20 explained that Rambus was “extremely concerned and worried that this was a low ball offer that
21 Samsung was throwing on the table as if throwing down the gauntlet to say either take this offer
22 or there will be other results.” Id. at 971:19-972:2. Specifically, Rambus’s representatives told
23 Mr. Shim that “we were concerned that if we did not accept this offer, it was his and Samsung’s
24 intention to file suit against Rambus.” Id. at 972:3-6.
25 275. Given the parties’ discussion of the June 3 proposal at the June 6 meeting,
26 Mr. Shim’s testimony that he “never got a chance” to explain the $3.5 million quarterly payment
27 numbers or other aspects of the June 3 proposal is not credible. See Trial Tr. at 377:22-378:1,
28 451:14-16.
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1 276. During the June 6, 2005 meeting, Rambus reiterated its willingness to
2 negotiate a deal “along the lines of” Rambus’s May 18 proposal. See Trial Tr. at 972:7-15.
3 Samsung did not accept Rambus’s May 18 proposal. See id. at 972:16-21. Then, Rambus offered
4 another proposal – this time a 30-day standstill proposal that addressed some of Rambus’s
5 concerns about Samsung initiating litigation. See Trial Tr. at 972:22-973:8; Exh. 4275. Mr. Shim
6 and his colleagues took a break from the negotiations to privately confer for approximately an
7 hour about the 30-day standstill proposal. See Trial Tr. at 973:9-20. When they returned, they
8 rejected Rambus’s offer. See id. at 973:21-24.
9 277. At no point during the renewal negotiations did Samsung make an offer for
10 renewal that included a price. See Trial Tr. at 974:13-16
11 278. During these renewal negotiations, no one from Samsung ever told Mr.
12 Blumberg, Rambus’s lead negotiator, that Section 8.5 of the SDR/DDR License required Rambus
13 to give Samsung the Infineon settlement deal. See Trial Tr. at 973:25-974:6 (Mr. Blumberg’s
14 testimony that the first time he had heard that theory from Samsung was during trial).
15 279. Nor did anyone from Samsung ever tell Mr. Blumberg that Rambus was
16 negotiating in bad faith. See Trial Tr. at 974:7-12.
17 280. To the contrary, Samsung’s 30(b)(6) corporate designee on the 2005
18 license negotiations, Seung Bum Ko, agreed that Rambus negotiated in good faith. He testified
19 that “Rambus, as well as Samsung also, made its best good faith [effort]8 to cooperate for a
20 renewal negotiation.” V109 (7/25/08 Depo. of S.B. Ko at 199:24:200:1). See also Exhibit 9270
21 (30(b)(6) notice, topic 15).
22 281. That the parties did not reach a new license agreement does not suggest
23 otherwise. As Samsung’s economist, Dr. Ugone, acknowledged, economic theory recognizes that
24 “different people can place different views on [the value of an asset]” and “you can have good
25 faith negotiations but not a deal.” Trial Tr. at 647:1-18. That was the situation here.
26
8
27 The transcript omits the word “effort” but the videotape testimony played at trial showed that Mr. Ko
said “effort” after “best good-faith.” On October 1, 2008, with the agreement of Samsung’s counsel,
28 Rambus lodged a copy of the videotape testimony on a DVD for the Court’s convenience.
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1 282. As the foregoing factual findings demonstrate, Rambus negotiated in good

2 faith for an extension of the SDR/DDR License or for a new agreement to replace or follow the
3 SDR/DDR License.
4 F. Samsung Destroyed Relevant and Material Evidence
5 283. The evidence at trial demonstrated that Samsung closely followed Rambus
6 litigation with other DRAM manufacturers in 2000 and 2001. In August 2000, Samsung hired
7 litigation counsel (specifically, David Healey) to follow the Rambus litigation with other DRAM
8 manufacturers. See V103 (5/14/2008 Depo. of Charles Donohoe at 9:15-23). That same month,
9 shortly after receiving information from Rambus about its patents, Samsung joined with other
10 companies in a joint defense agreement in order to analyze and attack Rambus’s patents. See
11 Exh. 9104. Accordingly, Jay Shim admitted that Samsung was considering the possibility of
12 being sued by Rambus or suing Rambus at this time. Trial Tr. at 422:15-19.
13 284. After signing the SDR/DDR License, Mr. Shim testified that one of the
14 reasons Samsung did not sign the post-contract November 2000 draft amendments was because of
15 Samsung’s uncertainty about how to proceed with respect to Rambus’s patents. See Trial Tr. at
16 248:19-249:3, 431:14-432:16.
17 285. Nevertheless, Samsung did not put a litigation hold in place for Rambus-
18 related documents until after this litigation began in June 2005. See V108 (7/28/08 Depo. of Jin
19 Seung Park at 25-27); Exh. 9339 (list of recipients of litigation hold notices). Indeed, some
20 Samsung employees with relevant documents did not receive a litigation hold notice until August
21 2007; other custodians of relevant documents never received one at all. See Exh. 9339.
22 286. Jon Kang signed the SDR/DDR License on behalf of Samsung (see Exh.
23 4226), he negotiated Amendment No. 1 (see Exhs. 9110, 9111), and he signed Amendment No. 1
24 (see Exh. 4240). He is now President of Samsung Semiconductor Inc., the U.S.-based defendant
25 and cross-plaintiff in the above-captioned litigation. Despite Mr. Kang’s central role in the
26 contracts that form the heart of Samsung’s Counts I-III, Mr. Kang did not receive any litigation
27 hold notice for Rambus related documents. See Exh. 9339. If he did receive such a notice (which
28 Samsung’s 30(b)(6) designee indicates he did not), he did not pay any attention to its instructions.
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1 See V104 (6/19/08 Depo. of Jon Kang at 208:2-12) (testifying that he received a litigation hold
2 notice but “didn’t pay much attention” to it and “wasn’t sure if it was for Rambus at all”).
3 287. With no litigation hold in place before June 2005, Samsung automatically
4 deleted and/or destroyed e-mails up to at least June 2005 on an ongoing basis. See, e.g., Trial Tr.
5 at 389:13-24 (Mr. Shim testifying that Samsung has “a system in place that would keep some of
6 these files but automatically erase some of these other files”); V104 (6/19/08 Depo. of John Kang
7 at 210:3-9) (e-mail “automatically erases after a certain time off of my computer”).
8 288. Samsung also shredded and/or destroyed hard copy documents. For
9 example, Mr. Kang testified that he would engage in a regular “garbage flush” of all his written
10 materials. V104 (6/19/08 Depo. of Jon Kang at 207:12-208:1) (“Whenever I have – the drawer
11 gets filled up, then I do a garbage flush of paperwork[.]”). He also testified that he would rip up
12 documents by hand. Id. at 210:20-211:1.
13 289. Mr. Kang’s regular garbage flush is consistent with Samsung’s document
14 retention policies. Samsung Electronics America (“SEA”) adopted a document retention policy
15 for the first time during license negotiations with Rambus. See Exh. 9220 (effective October 1,
16 2000). Then, in 2006, after this litigation had already commenced, SEA adopted a document
17 retention policy that required employees, among other things, to clean out and destroy documents
18 “[a]t least semiannually.” Exh. 9221. Semi-annual destruction of documents is still mandatory
19 under SEA’s current document retention policy. Exh. 9222.
20 290. The evidence at trial showed that Samsung destroyed license negotiation
21 documents, including drafts of license agreements, the parties’ post-execution amendment drafts,
22 internal Samsung communications regarding the SDR/DDR License, and Samsung’s report to its
23 Board of Directors when evaluating whether to enter the SDR/DDR License. See Trial Tr. at
24 388:22-391:8, 408-10 (testimony of Mr. Shim). The Bates numbers of the majority of the license
25 negotiation documents exchanged between Rambus and Samsung that were admitted at trial also
26 reveal that they were produced from Rambus’s files and not Samsung’s files. See, e.g., Exhs.
27 9064, 4208, 4209, 9100, 4222, 4223, 4224, 4227, 4229, 4230, 4231, 4232, 4233, 9109, 9112,
28 9111, 10681, 10963, 4273. Samsung has never disputed that it has destroyed such documents,
6088127.1 -67- C 05-00334, 05-02298 RMW
1 nor did Mr. Shim offer any explanation for why these negotiation documents were not produced
2 from his files.
3 PROPOSED CONCLUSIONS OF LAW
4 A. Samsung’s Claims And Burden Of Proof
5 1. In Counts I-III of its SAC, Samsung brings claims for breach of contract
6 (Counts I-II) and breach of the implied covenant of good faith and fair dealing (Count III).
7 Samsung bears the burden of proving each element of each of its claims by a preponderance of
8 the evidence. See Aguilar v. Atlantic Richfield Co., 25 Cal. 4th 826, 861 (2000) (“As a general
9 rule, the ‘party desiring relief’ bears the burden of proof by a preponderance of the evidence.”);
10 Buss v. Superior Court, 16 Cal. 4th 35, 53 (1997) (“Evidence Code section 500 provides that,
11 generally, a party desiring relief must carry the burden of proof thereon.”); Cal. Evid. Code § 500
12 (“Except as otherwise provided by law, a party has the burden of proof as to each fact the
13 existence or nonexistence of which is essential to the claim for relief or defense that he is
14 asserting.”).
15 2. In addition to these three pleaded claims, Samsung raises an unpleaded
16 estoppel claim at trial, see infra Section F(1), arguing that the equitable doctrine of estoppel bars
17 Rambus from recovering damages as a result of Samsung’s infringement of Rambus’s patents
18 that would have the result of requiring Samsung to pay any “royalty rate” higher than that paid by
19 Infineon. As with its “contract” claims, Samsung carries the burden of proof for each and every
20 element of its estoppel claim. State Compensation Ins. Fund v. WCAB, 40 Cal. 3d 5, 16 (1985)
21 (“[T]he party relying on the estoppel must prove all of the elements.”); Wells Fargo Bank v. Bank
22 of America, 32 Cal. App. 4th 424, 438 (1995) (“It is the burden of the party asserting estoppel to
23 prove all of its requisite elements . . . .”); Simons, Calif. Evid. Manual § 10:9 (2008 ed.) (“The
24 burden of proving each element of an estoppel rests on the party seeking its benefit.”). Because
25 estoppels “are disfavored” under California law, Samsung cannot prevail unless it demonstrates
26 that use of the defense is “clearly warranted.” Newman v. Albert, 170 Cal. App. 2d 678, 685
27 (1959); see also Anza Parking Corp. v. City of Burlingame, 195 Cal. App. 3d 855, 861 (1987)
28 (“Generally the doctrine of estoppel is disfavored.”); International Ass’n of Fire Fighters v. City
6088127.1 -68- C 05-00334, 05-02298 RMW
1 of San Leandro, 181 Cal. App. 3d 179, 182 (1986) (same). To do so, every aspect of its claim
2 must be “substantiated in every particular.” Wells Fargo Bank, 32 Cal. App. 4th at 438.
3 B. Applicable Principles of Contract Interpretation
4 3. Samsung’s claims arise under state law, see ‘334 SAC ¶¶ 220-21; ‘2298
5 SAC ¶¶ 192-93, and the SDR/DDR License establishes California law as the applicable state law.
6 See Exh. 4226, § 9.1. Under California law, the parties’ contractual “intent is to be inferred, if
7 possible, solely from the written provisions of the contract. If contractual language is clear and
8 explicit, it governs.” Powerine Oil Co., Inc. v. Super. Ct., 37 Cal. 4th 377, 390 (2005) (internal
9 citations omitted); Cal. Civ. Code § 1639 (“When a contract is reduced to writing, the intention of
10 the parties is to be ascertained from the writing alone, if possible.”).
11 4. Although the language of the contract is of paramount importance, the
12 Court may consider extrinsic evidence if “the language of the [contract] is reasonably
13 susceptible” to the interpretation urged by the party seeking its admission. Pacific Gas & Elec.
14 Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33, 37 (1968). Extrinsic evidence that is
15 not consistent with the “contract’s express terms” must be excluded because it “does not give
16 meaning to the contract: rather it seeks to substitute a different meaning.” Gerdlund v. Electronic
17 Dispensers Int’l, 190 Cal. App. 3d 263, 273 (1987). Although the Court may consider and admit
18 extrinsic evidence as an aid in interpreting the meaning of the language used by the parties in
19 their contract, such evidence “is not admissible to add to, detract from, or vary the terms” of an
20 integrated written agreement. Pacific Gas & Elec. Co., 69 Cal. 2d at 39; see also Altera Corp. v.
21 Clear Logic, Inc., 424 F.3d 1079, 1091 (9th Cir. 2005) (“[P]arties may introduce evidence to
22 explain the terms of the contract, but they may not introduce evidence of terms not specifically
23 included in the contract or evidence that contradicts the terms of the contract.”).
24 5. In instances where extrinsic evidence is admissible, the Court may consider
25 drafts of the contract that were exchanged between the parties in connection with negotiations.
26 Of particular importance to this case, where a contractual term was proposed but not accepted
27 during the negotiations, the contract should not be construed as encompassing those rejected
28 terms. See Sun Pacific Farming Co-op., Inc. v. Sun World Int'l Inc., 2006 WL 1716206, at *10
6088127.1 -69- C 05-00334, 05-02298 RMW
1 (E.D. Cal. 2006) (“[W]here the parties’ negotiation history or extrinsic evidence shows that terms
2 were unacceptable, the court may not read the rejected terms into the contract.”), aff'd in relevant
3 part and vacated and remanded on separate topic, 277 Fed. Appx. 727 (9th Cir. 2008); People v.
4 Goodloe, 37 Cal. App. 4th 485, 490-91 (1995) (applying same principle in context of interpreting
5 a statute).
6 6. In its presentation at trial, Samsung relied heavily upon evidence of prior or
7 contemporaneous statements made by Rambus employees during the negotiations for the
8 SDR/DDR License. Under California’s parol evidence rule, such statements “whether oral or
9 written,” may not be relied upon “to vary, alter or add to the terms of an integrated written
10 instrument.” Casa Herrera, Inc. v. Beydoun, 32 Cal. 4th 336, 343 (2004). This rule, codified in
11 California Civil Code section 1625 and Code of Civil Procedure section 1856, is not simply a rule
12 of evidence – it is part of the “substantive law” of contract interpretation. Casa Herrera, Inc., 32
13 Cal. 4th at 343-44. The parol evidence rule provides that “the act of executing a written contract .
14 . . supersedes all the negotiations or stipulations concerning its matter which preceded or
15 accompanied the execution of the instrument.” Id. at 344 (emphasis in original). Because “the
16 written agreement supersedes these negotiations and becomes the parties’ sole agreement . . .
17 extrinsic evidence may not ‘add to, detract from, or vary the terms of’ that agreement.” Id.
18 (quoting Pacific Gas & Elec. Co., 69 Cal. 2d at 39) (internal citations omitted).
19 7. Samsung also relied at trial upon the language of two “whereas” recitals
20 included in the preamble of the SDR/DDR License. Although, like parol evidence, recitals may
21 provide context about the circumstances surrounding the agreement, they cannot be permitted to
22 control over the express provisions of the contract, or create any rights beyond those established
23 by the operative provisions of the contract. McDonough v. Chu Chew Shong, 21 Cal. App. 2d
24 257, 259 (1937) (identification of offenses in contract to indemnify bail bondsmen was “mere
25 recital and form[ed] no part of the contractual obligation”); Patwardhan v. Kale, No. E031792,
26 2003 WL 21130236, at * 5 (Cal. Ct. App. 4th Dist. May 16, 2003) (quoting 17A C.J.S. (1999)
27 Contracts, § 317) (“Recitals . . . such as ‘whereas’ clauses, are merely explanations of the
28 circumstances surrounding the execution of the contract, and are not binding obligations unless
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1 referred to in the operative provisions of the contract.); A.S.D. v. W. Mun. Water Dist. of
2 Riverside County, No. E030189, 2002 WL 31820335, at *8 (Cal. Ct. App., 4th Dist. Dec. 17,
3 2002) (accord).9 Although, as noted, California law governs the contractual issues in this case,
4 the limited effect of recitals is widely recognized across a number of jurisdictions. See, e.g., 17A
5 C.J.S. (2008) Contracts, § 317 (“Recitals in a contract generally do not create binding obligations
6 unless referred to in the operative provisions in the contract.”); Grynberg v. FERC, 71 F.3d 413,
7 416 (D.C. Cir. 1995) (“[I]t is standard contract law that a Whereas clause, while sometimes useful
8 as an aid to interpretation, ‘cannot create any right beyond those arising from the operative terms
9 of the document.’”); Rose v. M/V “Gulf Stream Falcon,” 186 F.3d 1345, 1350 (11th Cir. 1999)
10 (litigant’s “reliance on [a] ‘whereas clause’ was misplaced” because, inter alia, “‘whereas’ or
11 other prefatory clauses are not binding”); Atl. Mut. Ins. Co. v. Metron Eng’g & Constr. Co., 83
12 F.3d 897, 899 (7th Cir. 1996) (“[I]ntroductory language or recitals are not binding obligations
13 unless so referred to in the operative portion of the instrument”).
14 C. Count I: Breach of Section 3.8
15 8. Samsung’s SAC sets forth the basis for the alleged violation of Section 3.8
16 of the SDR/DDR License in Paragraphs 175-184 of the ‘2298 SAC and Paragraphs 203-212 of
17 the ‘334 SAC. Specifically, Samsung alleged that Rambus breached Section 3.8 by failing to
18 notify Samsung of the “lower effective royalty rate provided for in the Rambus/Infineon
19 License,” and “by failing to adjust SEC’s royalty rate based upon the lower effective royalty rate
20 provided for in the Rambus/Infineon License.” ‘2298 SAC ¶¶ 179, 182; ‘334 SAC ¶¶ 207, 210.
21 9. Samsung cannot prevail on its claim that Rambus breached Section 3.8 of
22 the SDR/DDR License. As set forth in subsections (1) - (2), below, this claim fails because: (1)
23 the language of Section 3.8 does not support a conclusion that the parties intended the term
24
25 9
Patwardhan and A.S.D. are unpublished decisions. Although not citable in California state court, they
26 may properly be considered by this Court. See Scottsdale Ins. Co. v. OU Interests, Inc., No. C 05-313
VRW, 2005 WL 2893865, *3 (N.D. Cal. Nov. 2, 2005) (“[U]npublished opinions that are supported by
27 reasoned analysis may be treated as persuasive authority.”) (citing Employers Ins. of Wausau v. Granite
State Ins. Co., 330 F.3d 1214, 1220 n. 8 (9th Cir. 2003) (“[W]e may consider unpublished state decisions,
28 even though such opinions have no precedential value”)).
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1 “royalty rate” to include lump sum payments; and (2) the extrinsic evidence available from the
2 negotiations of the SDR/DDR License and the 2001 Amendment to the License is inconsistent
3 with Samsung’s proposed interpretation of Section 3.8.
4 1. Section 3.8 Does Not Require Rambus To Adjust Samsung’s Royalty Rates
Based On That Agreement.
5
10. The plain language of Section 3.8 requires Rambus to notify Samsung of a
6
“lower royalty rate” paid by a third-party for SDR SDRAM, SDR SGRAM, DDR SDRAM, or
7
DDR SGRAM, and automatically to adjust Samsung’s royalty to conform to such lower rate for
8
one or more of the named product categories set forth in Section 3.1. See Proposed Finding of
9
Fact No. 132.
10
11. With regard to Samsung’s claim that Rambus failed to provide proper
11
notice of the Infineon Settlement Agreement under Section 3.8, that claim fails for the reasons set
12
forth Section D(1)(a) as set forth below.
13
12. With regard to Samsung’s contention that Rambus breached Section 3.8 by
14
not providing Samsung the benefits of the Infineon Settlement Agreement, the Court finds that
15
the Infineon Settlement Agreement did not trigger Rambus’s obligations under Section 3.8
16
because the capped quarterly installment payments made by Infineon amounted to a lump sum
17
settlement and did not incorporate a “royalty rate” for any of the products covered by Section 3.8.
18
13. The question for the Court is whether the Infineon Settlement Agreement
19
triggered application of Section 3.8, which required Rambus to extend to Samsung any “royalty
20
rate agreed to be paid . . . by a Third Party . . . for products corresponding to SDR SDRAM, DDR
21
SDRAM, SDR SGRAM, DDR SGRAM [that] is lower than that specified in Section 3.1(b)” of
22
the SDR/DDR License. The Court’s analysis of this question is informed by the fact that the
23
language of Section 3.8 contemplates that the identification of a “lower royalty rate” from a third-
24
party agreement and provision of such rate to Samsung is straightforward and subject to
25
automatic application. The language of Section 3.8 does not contemplate that any negotiation
26
between the parties would be needed to effectuate its provisions, nor does it contain any
27
provisions to resolve any disputes with regard to the identification of an appropriate “lower
28
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1 royalty rate.”
2 14. The Court necessarily is also informed by the fact that, in drafts of the
3 SDR/DDR License and other agreements between these parties, they contemplated more fulsome
4 most-favored licensee provisions that covered various types of third-party agreements, including
5 those in which payment was in the form of a lump sum payment, and, in recognition of the
6 greater complexities of such provisions, added provisions calling for negotiation and/or mediation
7 regarding the comparison of such third-party agreements to the Samsung SDR/DDR License.
8 15. Importantly, the issue before the Court is not whether Samsung might view
9 the Infineon Settlement Agreement as preferable to the SDR/DDR License. Nor is the question
10 whether, in that event, the parties could have engaged in negotiations designed to determine
11 whether the SDR/DDR License should be modified. Instead, the question is whether the specific
12 provision to which the parties agreed gave Samsung the right to a reduction of its royalty
13 obligations based on Infineon’s lump sum payments. For the reasons stated below, the Court
14 finds that it did not.
15 16. Unlike Samsung’s royalty payments as called for in the SDR/DDR
16 License, Infineon’s installment payments were not based on a percentage of net sales or in any
17 way dependent on sales volume. That Infineon made its $50 million payment in quarterly
18 installments does not convert that payment into a “rate,” because the total amount of Infineon’s
19 payment was fixed, and the timing of its installment payments (from fourth quarter 2005 through
20 fourth quarter 2007) was arbitrary and bore no relation to the period during which Infineon was
21 licensed (from second quarter 2005 through the expiration of Rambus’s patents). See Proposed
22 Findings of Fact Nos. 176-178.
23 17. Dr. Ugone, Samsung’s economic expert, agreed that a single “royalty rate”
24 could not be derived from the Infineon Settlement Agreement and testified that it was difficult to
25 provide the Court with anything more definite than a range of numbers between 0.17% and
26 0.41%. Proposed Finding of Fact No. 166. Indeed, as noted above, Dr. Ugone employed three
27 different methodologies in attempting to ascertain an “effective” royalty rate from the Infineon
28 Settlement Agreement. Proposed Finding of Fact No. 167. Moreover, Dr. Ugone’s conclusions
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1 failed to take into account numerous differences between the terms of the Infineon Settlement
2 Agreement and the SDR/DDR License that would need to be considered in ascertaining an
3 “effective” royalty rate, including the fact that the Infineon Settlement Agreement licensed all of
4 Rambus’s patents for all of Infineon’s memory products for the life of the patents, whereas the
5 SDR/DDR License only licensed certain discretely identifiable products for five years. See id.,
6 No. 163. Dr. Ugone also failed to account for the substantial non-monetary consideration that
7 Rambus received in exchange for licensing its patents to Infineon. See id., No. 168. Given the
8 material differences between the Infineon Settlement Agreement and the SDR/DDR License,
9 there is no readily identifiable “royalty rate” in the Infineon Settlement Agreement that could
10 simply have been substituted for the rates specified in the SDR/DDR License for the products
11 covered by Section 3.8. Indeed, Samsung’s own negotiator testified that the numerous
12 differences between the agreements prevented even Samsung itself from deriving an effective rate
13 under the SDR/DDR License because “[y]ou can’t compare apples to oranges.” Trial Tr. at
14 376:19-22.10
15
16 10
At closing, Samsung’s counsel relied heavily on a district court case from the Eastern District of
Michigan, Cardinal of Adrian, Inc. v. Amerock Corp., 208 U.S.P.Q. 822, 1979 WL 24997 (E.D. Mich.
17 Aug. 22, 1979), as support for the notion that a licensee paying a running royalty is entitled to a lump-sum
deal given to another licensee. See Trial Tr. at 1111:25-1114:15. The Court disagrees. As an initial
18
matter, every MFL provision must, of course, be interpreted on its own basis, taking into account the text
19 of the provision and any relevant surrounding circumstances. In Cardinal of Adrian, the MFL provision
gave the licensee “the option of modifying this agreement” such that the licensee would pay royalty
20 computed on “the same basis” as a later licensee and “upon the same terms and conditions” as the later
licensee. Id. at 823. Section 3.8 contains no similar language, but simply calls for automatic substitution
21 of lower “royalty rates” attributable to specific products in a third-party agreement for those specified in
Section 3.1(b). Indeed, in Hazeltine Corp. v. Zenith Radio Corp., 100 F.2d 10, 18 (7th Cir. 1938), the
22 Seventh Circuit noted that “‘rate’ . . . is usually used with the meaning ‘amount per unit,’” and that
“[t]here have been various ‘units’ used in license contracts under patents such as ‘device manufactured,’
23 ‘period of use,’ or ‘device sold.’” In referring to an “amount per unit” where the unit constituted a “period
of use,” the Court was referring to the periodic payments running with usage rights discussed earlier in
24 Proposed Findings of Fact Nos. 176-178. Importantly, however, the Court noted that, because of the
“vital and significant differences between a fixed sum per period rate of royalty and a percentage of selling
25 price rate of royalty” there was “no basis in fact for the conversion of a lump sum rate of royalty [paid per
year of use] into a rate of per cent of selling price royalty.” Hazeltine, 100 F.2d at 18. In other words, the
26 Court implicitly acknowledged that the simple substitution of a new “rate” as contemplated by Section 3.8
would not be possible even for a flat payment running with the time of use, let alone a fixed lump sum
27 payment like that in the Infineon Settlement. See also Harley C. Loney Co. v. Mills, 205 F.2d 219 (7th
Cir. 1953) (in contrasting application of MFL provision to third-party agreement calling for running
28
royalties with one providing for lump sum payment, court stated that “if plaintiff's license with Perfect had
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1 18. Therefore, this Court concludes that the Infineon Settlement Agreement did
2 not trigger Rambus’s obligations under Section 3.8 to notify Samsung of a “lower royalty rate” or
3 to automatically adjust Samsung’s royalty payments on the basis of a “lower royalty rate.”
4 Accordingly, Rambus did not breach Section 3.8 of the SDR/DDR License.
5 2. The Extrinsic Evidence Indicates That The Parties Did Not Intend Section 3.8
To Reach Lump Sum Settlement Payments.
6
19. The negotiation history of Section 3.8 supports the conclusion that the
7
parties did not intend lump sum payments to trigger an adjustment of Samsung’s royalty
8
obligations under Section 3.8 of the SDR/DDR License.
9
20. On two separate occasions in October 2000, Samsung requested
10
contractual language that would require Rambus to adjust Samsung’s royalty payments in
11
response to a third-party’s lump sum payments and on both occasions, Samsung’s proposals were
12
rejected. On October 6, 2000, Mr. Shim requested a “Most Favorable Nations Clause” that would
13
give Samsung the right retroactively to amend the “royalty terms of the [SDR/DDR] Agreement”
14
on the basis of a post-execution judgment or settlement resulting in “lower royalty terms.”
15
Proposed Finding of Fact No. 136. On October 11, 2000, Mr. Steinberg proposed language
16
giving Samsung an option prospectively to apply a “lower royalty rate” paid by a third-party for
17
the same products identified in the SDR/DDR License. See id., No. 137. Several days later, on
18
October 16, 2000, Mr. Shim proposed additional language that specifically accounted for the
19
payment of consideration other than a running royalty (for example, a lump sum).” See id., Nos.
20
139-140. Recognizing that the conversion between lump sums and royalty rates might provoke
21
disagreement, Mr. Shim also proposed applying the parties’ dispute resolution procedures to
22
Section 3.8. On October 22, 2000, Mr. Steinberg sent a revised version of the SDR/DDR License
23
that omitted any reference to other forms of consideration and exclusively provided only for the
24
adjustment of Samsung’s royalty payments in response to a “lower royalty rate.” See id., No.
25
26 provided for [running] royalty payments less than those provided in its agreement with defendant, the
latter, without any action on its part, would have been entitled to the benefit of such reduced rates. . . . But
27 the situation before us is different. Whether the lump sum payment by Perfect for a fully-paid up license
was ‘more favorable terms’ than the royalty payments then being made by defendant was uncertain: it was
28
an open question.”).
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1 142. The version of Section 3.8 that Mr. Steinberg sent on October 22, 2000 is identical to the
2 version in the final SDR/DDR License.
3 21. Under California law, a contract should not be construed to include terms
4 that were rejected in the course of negotiations. See Proposed Conclusion of Law No. 5.
5 Samsung sought to broaden Section 3.8 to capture other forms of consideration, including lump
6 sum payments, on two occasions and each time Rambus responded with a narrow provision that
7 limited Samsung’s rights to the benefit of a “lower royalty rate.” This negotiation history
8 supports a conclusion that the parties discussed the scope of the most-favored licensee provision
9 and agreed that other forms of consideration would not trigger Samsung’s rights or Rambus’s
10 obligations under Section 3.8. Therefore, this Court will not interpret Section 3.8 to impose rights
11 or obligations that the parties’ rejected in the course of negotiations.
12 22. The negotiation history of Amendment No. 1 to the SDR/DDR License,
13 and the language of the amendment itself, also support the conclusion that the parties did not
14 intend lump sum payments to trigger an adjustment of Samsung’s royalty obligations under
15 Section 3.8.
16 23. In May 2001, Samsung notified Rambus that it intended to withhold its
17 first quarter royalty payments under the SDR/DDR License and the parties began negotiating an
18 amendment that was signed in July 2001. On July 10, 2001, Mr. Shim sent Rambus a draft of the
19 most-favored licensee provision of the amendment that described the procedure for calculating a
20 “rate” from lump sum payments that Rambus might receive from third parties. See Proposed
21 Finding of Fact No. 147.
22 24. Mr. Shim’s proposal is at odds with Samsung’s claim that lump sum
23 payments were already included within the ambit of “royalty rates” under Section 3.8. If the
24 parties intended Section 3.8 to have the meaning Samsung now ascribes to it, the addition of this
25 language in Paragraph 8 of the proposed amendment would have been unnecessary and
26 redundant. The fact that Samsung proposed this additional language thus supports a conclusion
27 that Samsung did not believe that lump sum payments were already captured by a most-favored
28 licensee provision that only referred to “royalty rates.”
6088127.1 -76- C 05-00334, 05-02298 RMW
1 25. This conclusion is further compelled by consideration of the language of

2 Amendment No. 1 to the SDR/DDR License. The final version of the Amendment does not
3 specify the procedure to be applied for calculating a “rate” from a lump sum payment, and only
4 requires the parties “to negotiate in good faith to modify the terms of the [SDR/DDR]
5 Agreement.” Proposed Finding of Fact No. 149. At the time that this language was negotiated,
6 Samsung had significant leverage over Rambus, which had recently suffered an adverse verdict in
7 the Infineon case and Samsung in fact had been withholding its royalty payments. See id., Nos.
8 145, 151. Given these circumstances, it is reasonable to conclude that Samsung would have
9 extracted the most favorable terms possible. If, however, Section 3.8 already granted Samsung
10 the automatic right to an “effective royalty rate” computed from a lump sum, then Amendment
11 No. 1 would have reduced Samsung’s rights, by entitling it only to good-faith negotiations with
12 Rambus about possible royalty rate adjustment rather than the automatic modification of its
13 payments in the event that Rambus licensed its patents for a lump sum. Given that Samsung
14 insisted on Amendment No. 1 to reduce its payment obligations and expand its rights, it defies
15 reason to believe that Samsung would, in this regard, have negotiated for terms less favorable
16 than those it already possessed.
17 26. The final language of Amendment No. 1 explicitly distinguishes between
18 running royalties and lump sum payments by modifying Samsung’s royalty obligations with
19 respect to memory products and providing for the quarterly payment of “a fixed lump sum
20 royalty” to be made “in lieu of the royalty and royalty report specified in Section 3 of the
21 [SDR/DDR] Agreement.” Proposed Finding of Fact, No. 152. This distinction supports a
22 conclusion that the parties did not understand a “royalty rate” to include lump sum payments, and
23 believed that it was necessary to treat the terms separately in contractual provisions.11
24
25 11
In its closing argument, Samsung intimated that Rambus’s position regarding Section 3.8 is inconsistent
with its recognition at the time of the Infineon negotiations that the Infineon Settlement Agreement might
26 trigger its most-favored licensee obligations to Elpida. The Court disagrees.
27 REDACTED
28
By contrast,
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1 27. Therefore, on the basis of the extrinsic evidence available from the
2 negotiations of the 2000 SDR/DDR License and the 2001 Amendment to the SDR/DDR License,
3 this Court concludes that Rambus did not breach Section 3.8 of the SDR/DDR License.
4 D. Count II: Breach of Section 8.5
5 28. There are three independent reasons why Samsung cannot prevail on its
6 claim that Rambus breached Section 8.5 of the SDR/DDR License. As discussed in subsections
7 (1) - (3) below, this claim fails because: (1) Rambus’s actions during the negotiations complied
8 with Section 8.5, which did not require Rambus to offer Samsung any particular economic terms,
9 let alone a deal equivalent to Infineon’s; (2) any obligations Rambus would have had under
10 Section 8.5 were, in any event, eliminated due to Samsung’s breach of its obligations under the
11 royalty audit provisions of the SDR/DDR License; and (3) the expectation damages that Samsung
12 seeks are speculative and not recoverable as a matter of controlling California law.
13 1. Rambus Did Not Breach Section 8.5.
14 a. There Was No Breach Based On Failure To Provide Notice of Infineon

Terms.
15
29. Samsung’s SAC sets forth the basis for Count II, the alleged violation of
16
Section 8.5. See ‘2298 SAC ¶¶ 185-190; ‘334 SAC ¶¶ 213-218. In its pleadings, Samsung
17
alleged that Rambus breached Section 8.5 by failing “to provide notice of certain terms of the
18
Rambus/Infineon license as required under Section 3.8 of the SDR/DDR License….” ‘2298 SAC
19
¶¶ 187-188; ‘334 SAC ¶¶ 215-216; see also Samsung’s Supplemental Objections and Responses
20
to Rambus’s Second Set of Interrogatories; Trial Tr. at 936:23-938:16.
21
22 Section 3.8 of the SDR/DDR License permitted adjustment of Samsung’s royalty obligations only in the
event that Rambus granted a “lower royalty rate” to a third-party licensee, Exh. 4226, § 3.8, with the
23
parties specifically omitting any reference to alternative forms of consideration in negotiating Section 3.8.
24 See Proposed Finding of Fact No. 132. Whether the Infineon Settlement Agreement could have
implications for the specific MFL provisions in the Elpida Amendment No. 2 is not a matter this Court
25 need consider. But see Trial Tr. at 990:19-25 (Mr. Blumberg’s testimony that “the reason we wanted to
increase to [$]5.85 [million] was to make the payments even to avoid any discussion whether there was
26 any triggering of the [Elpida] MFL clause or not.”). REDACTED
REDACTED it is not surprising that the
27 Infineon Settlement Agreement might have different consequences for the two different licenses. Thus,
the Court does not find Rambus’s consideration of the potential effect of the Infineon Settlement
28 Agreement upon the Elpida MFL provision to be inconsistent with its position regarding Section 3.8.
6088127.1 -78- C 05-00334, 05-02298 RMW
1 30. Rambus had no obligation under the SDR/DDR License to give Samsung a
2 copy of the Infineon Settlement Agreement since the SDR/DDR License, including Section 3.8,
3 did not grant Samsung audit rights with regard to third party licenses. See Proposed Findings of
4 Fact Nos. 183 & 185.
5 31. Moreover, as noted above, Rambus could not share a copy of the Infineon
6 Settlement Agreement with anyone from Samsung without violating its confidentiality
7 obligations to Infineon as set forth in the agreement. See Proposed Findings of Fact Nos. 254-
8 255.
9 32. In any event, there is no dispute that Mr. Shim of Samsung had (a) the
10 press release with details of the Infineon Settlement Agreement, (b) the public, redacted copy of
11 the Infineon Settlement Agreement from Rambus’s SEC filings, and (c) Mr. Blumberg’s answers
12 to Mr. Shim’s questions about the settlement. See Proposed Findings of Fact Nos. 253 & 256-
13 257.
14 33. Therefore, there was no breach of Section 8.5 based on Samsung’s
15 nondisclosure-based allegations.
16 b. There Was No Breach Based On Failure to Offer Samsung The
“Infineon Deal.”
17
34. By the end of trial, Samsung’s counsel acknowledged that Section 8.5 did
18
not explicitly require Rambus to give Samsung most favored licensee terms in any renewal. See
19
Trial Tr. at 1121:9-1122:6, 1128:13-14. Instead, Samsung now alleges that Section 8.5 impliedly
20
required Rambus to offer Samsung the “Infineon deal,” that Rambus failed to offer the Infineon
21
deal, and that this failure was a breach of Section 8.5. See id.
22
35. There is no support for Samsung’s claim that Section 8.5 required Rambus
23
to offer Samsung the Infineon deal.
24
36. The plain language of Section 8.5 contains no requirement, or even
25
suggestion, that “good faith” negotiations required Rambus to offer Samsung the most favorable
26
licensee terms. See Exh. 4226, § 8.5. Instead, Section 8.5 contemplates that the agreement about
27
which the parties would engage in good faith negotiations would be one that is “mutually
28
6088127.1 -79- C 05-00334, 05-02298 RMW
1 satisfactory” to both parties.

2 37. Samsung’s negotiating team agrees with the plain meaning of the language
3 of the SDR/DDR License. Han Yong Uhm, a member of Samsung’s 2000 negotiation team,
4 agreed that there is no such requirement to extend most favored nations status in Section 8.5. See
5 Proposed Finding of Fact No. 188. Similarly, Jay Shim in his testimony in 2005 conceded that
6 the SDR/DDR License only required most favored licensee protections during the term of the
7 agreement, not thereafter. See Proposed Finding of Fact No. 210.
8 38. Under the principles of contract interpretation outlined in Section B above,
9 the Court can only consider extrinsic evidence consistent with the plain language of the
10 agreement.
11 39. Here, the extrinsic evidence supports the interpretation of the plain
12 language that there was no obligation to give most favored licensee protection implicit in the
13 concept of “good faith.”
14 40. In Samsung’s proposed term sheet on October 6, 2000, Samsung requested
15 that most favored licensee status be included in any renewal. Rambus did not agree to put this in
16 the agreement. See Proposed Finding of Fact No. 195-196.
17 41. Just before signing the SDR/DDR License, Mr. Shim recognized that the
18 language of Section 8.5 did not provide an obligation for Rambus to give Samsung most favored
19 license terms in any renewal. As a result, he requested a post-contract amendment to add this
20 right for Samsung that was not already present. See Proposed Findings of Fact Nos. 202-205.
21 The post-contract amendment to add this right for Samsung was never signed. See Proposed
22 Finding of Fact No. 206.
23 42. In July 2001, when a different amendment to the SDR/DDR License was
24 signed, it added language to the duty to negotiate in good faith provision to make clear that most
25 favored licensee status should be part of the good faith negotiations. See Proposed Findings of
26 Fact Nos. 221-222. If the duty to give most favored licensee status was already implicit in the
27 concept of a good faith negotiation, then this additional language in the July 2001 amendment
28
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1 would have been mere surplusage.12

2 43. By its terms, the Amendment was terminable by either party under a
3 number of circumstances, and thus was clearly understood to be of limited duration. When the
4 parties added the most favored licensee provision to the negotiation section of the Amendment,
5 however, they left Section 8.5 intact, and agreed that the terms of that original provision would
6 resume in force when the Amendment was terminated.
7 44. The Court is unable to ascertain what Samsung’s theory is for why the
8 post-contract draft amendments that were never signed have any relevance to the interpretation of
9 the SDR/DDR License. One of Samsung’s apparent theories – that the November 2000 post-
10 contract amendments were ultimately signed as the July 2001 amendment – is not credible and
11 can be afforded no weight. First, more than seven months passed between the November 2000
12 discussions about an amendment and the July 2001 amendment. Moreover, the amendment was
13 precipitated by the adverse judgment for Rambus in the Infineon litigation in the Eastern District
14 of Virginia, which occurred in May 2001. Given the timing and the genesis of the July 2001
15 Amendment, it seems clear that the November 2000 discussions ended with no agreed-upon
16 amendment to the SDR/DDR License, and that the negotiations for the 2001 Amendment arose
17 from separate and distinct discussions. Second, the Court cannot credit Mr. Shim’s trial
18 testimony that the alleged verbal promises surrounding the November 2000 post-contract
19 amendment negotiations were important to his decision to recommend that Samsung sign the
20 SDR/DDR License. This testimony is not credible. Mr. Shim proclaimed no recollection
21 whatsoever about the November negotiations or amendments in his deposition just a few months
22 before trial. See Proposed Finding of Fact No. 209. His subsequent “recollection” of the
23 communications surrounding the negotiations at trial cannot be used to create obligations for
24 Rambus that are not found in the language of the SDR/DDR License. Moreover, because
25 Samsung has failed to produce any documents from its files related to this aspect of the
26
27
12
The July 2001 amendment was terminated and is not operative for purposes of giving Samsung the right
28 to the Infineon deal in the 2005 negotiations. See Proposed Finding of Fact No. 223.
6088127.1 -81- C 05-00334, 05-02298 RMW
1 negotiation, the inference that there were damaging documents there that were destroyed by Jon
2 Kang’s “garbage flush” of materials or other spoliation warrants an adverse inference that the
3 materials that were not produced would have been harmful to Samsung. See Proposed Finding of
4 Fact Nos. 283-290.
5 45. Even if this Court did credit Mr. Shim’s testimony about an alleged oral
6 agreement to amend the SDR/DDR License to afford Samsung most favored licensee status in
7 any renewal, such a verbal side agreement is not enforceable in light of Section 10.9 of the
8 SDR/DDR License. Section 10.9 provides: “No alteration, amendment, waiver, cancellation or
9 any other change in any term or condition of this Agreement shall be valid or binding on either
10 party unless the same shall have been mutually assented to in writing by both parties.” Exh.
11 4226, § 10.9. The post-contract amendment negotiations in November 2000 did not culminate in
12 written mutual assent because the parties failed to reach agreement on the material terms of the
13 amendment, including the products to be covered in a renewal and whether the MFL applied to
14 “effective” (as opposed to actual, identifiable) royalty rates. Compare Exh. 4221 with Exh. 4223.
15 California law is clear that a plaintiff cannot rely on post-contract statements to imply a term not
16 existing in the contract where, as here, the purported post-contract modification did not comply
17 with the contract’s express provisions for how modifications will be adopted. See Stanley v.
18 Univ. of So. Cal., 178 F.3d 1069, 1078 (9th Cir. 1999) (applying California law and citing
19 California case for the rule that “plaintiff cannot rely on post-contract implied terms when
20 contract required all modifications be written”); Haggard v. Kimberly Quality Care, Inc., 39 Cal.
21 App. 4th 508, 521 (1995) (California case cited in Stanley holding that, in light of contractual
22 provision requiring “formal written agreement” for any modifications, “no contract implied from
23 [post-contract] oral statements or conduct could” be established to modify the provisions of the
24 existing written contract).
25 46. In sum, this Court cannot find an obligation to give Samsung the “Infineon
26 deal” implicit in Section 8.5, and therefore any failure to offer those terms does not constitute a
27 breach of Section 8.5.
28
6088127.1 -82- C 05-00334, 05-02298 RMW
1 c. There Was No Breach Based On Failure to Reach Agreement On

Renewal or Extension.
2
47. There is no support for Samsung’s claim that Section 8.5 required Rambus
3
to agree with Samsung on a renewal or extension of the SDR/DDR License.
4
48. The plain language of Section 8.5 contains no requirement, or even
5
suggestion, that “good faith” negotiations required an automatic extension of the SDR/DDR
6
License. See Exh. 4226, § 8.5.
7
49. Under the principles of contract interpretation outlined in Section B above,
8
the Court can only consider extrinsic evidence consistent with the plain language of the
9
agreement.
10
50. The extrinsic evidence presented all supports the interpretation of the plain
11
language that there was no obligation to renew or extend the SDR/DDR License. See Proposed
12
Findings of Fact Nos. 192-210.
13
51. Thus, the Court interprets Section 8.5 as requiring good faith negotiations
14
with a view to achieving a mutually satisfactory patent license agreement.
15
52. Further, the Court finds that Rambus did not breach its obligation to
16
negotiate with Samsung in good faith with a view to achieving a mutually satisfactory patent
17
license agreement.
18
53. Rambus initiated renewal negotiations in July 9, 2004, which was well
19
before the six month period required by Section 8.5. See Proposed Findings of Fact Nos. 238-
20
245.
21
54. Rambus made an offer for renewal on February 20, 2005. See Proposed
22
Finding of Fact No. 247.
23
55. Samsung never accepted Rambus’s February 20, 2005 renewal offer. See
24
Proposed Finding of Fact No. 260.
25
56. The Court does not accept Samsung’s assertion that this offer was
26
withdrawn in bad faith before Samsung had a chance to respond to it. To the contrary, the
27
evidence demonstrates that Samsung had nearly six weeks to consider that renewal offer, was
28
6088127.1 -83- C 05-00334, 05-02298 RMW
1 informed that the offer was time sensitive and would be withdrawn in the event that Rambus
2 settled with Infineon, and met with Rambus representatives on March 8 to discuss the renewal
3 offer nearly a month before it was ultimately withdrawn. See Proposed Finding of Fact No. 260.
4 57. After Rambus settled with Infineon and withdrew its February 20 renewal
5 offer, Rambus continued to make considerable efforts to negotiate with Samsung. Rambus
6 presented several options for renewal and for a standstill agreement between April 1, 2005 and
7 June 6, 2005. See Proposed Findings of Fact Nos. 264-267 & 276.
8 58. The Court does not accept Samsung’s argument that discussion of
9 Samsung’s potential antitrust violations constituted “threats” that were inconsistent with a good
10 faith negotiation. Rather, the evidence is clear that the discussion of the antitrust issues came up
11 in the negotiation as part of a discussion of the broad release of claims requested by Samsung and
12 Rambus’s effort to place a value on that release. See Proposed Finding of Fact No. 270.
13 59. Further, the Court does not accept Samsung’s contention that the May 18
14 standstill offer from Rambus was in bad faith because it did not offer a full renewal or extension.
15 The evidence demonstrated that both parties thought it made sense to switch to a standstill given
16 the uncertainties about a renewal expressed by both sides. See Proposed Findings of Fact No.
17 269. Moreover, Mr. Blumberg offered evidence that the goal of the standstill was to reach
18 resolution of the dispute before the expiration of the SDR/DDR License in such a way that it
19 allowed more time for the parties to negotiate and come to agreement on a renewal or extension.
20 See Proposed Findings of Fact Nos. 266-269. This is not evidence of bad faith. To the contrary,
21 it demonstrates that Rambus’s negotiators were trying to think creatively in generating options as
22 part of a good faith negotiation effort.
23 60. The Court does not accept the proposition that Rambus’s decision to file
24 this lawsuit on June 6, 2005 made the entirety of the 2004-2005 negotiations in bad faith. The
25 evidence demonstrated that Rambus considered Samsung’s June 3 offer to be a low-ball offer
26 with one-sided terms, and as a result, was worried Samsung was not taking the negotiation
27 seriously and was about to file a lawsuit against Rambus. See Proposed Findings of Fact No. 274.
28 Thus, after one last effort to negotiate on June 6, Rambus terminated the SDR/DDR License and
6088127.1 -84- C 05-00334, 05-02298 RMW
1 filed suit against Samsung.

2 61. Finally, the Court does not agree with Samsung’s claim that Rambus’s
3 termination of the SDR/DDR License based on Samsung’s failure to comply with its audit
4 responsibilities was a bad faith “pretext” that negates any good faith negotiations that took place.
5 As set forth in the findings above, Samsung failed to comply with its contractual obligations to
6 provide the auditors with information needed to verify the accuracy of Samsung’s royalty
7 payments and was continuously in violation of this obligation throughout the remaining term of
8 the agreement beginning from at least July 9, 2004, when Rambus first informed Samsung of the
9 breach both orally and in a written PowerPoint presentation and Samsung failed to take steps to
10 cure. See Proposed Findings of Fact Nos. 224-237. Rambus further notified Samsung of this
11 breach in writing in email correspondence from Mr. Danforth in February 2005 and in a letter
12 from Mr. Blumberg on April 1, 2005. See id., Nos. 234-235. Under Section 8.2 of the SDR/DDR
13 License, Samsung’s failure to cure this breach entitled Rambus to terminate the agreement, and
14 thus Rambus’s decision to do so was proper and cannot be characterized as bad faith.13 Indeed,
15 until trial, Samsung never challenged the propriety of the termination of the SDR/DDR License
16 on June 6, 2005. See SAC.
17 62. The Court’s examination of the evidence of the 2004-2005 negotiations
18 supports the finding that Rambus negotiated in good faith.
19 63. This finding of good faith negotiations is consistent with the parties’
20 conduct at that time. At no point during the 2004-2005 license negotiations did anyone from
21
22 13
The Court also rejects Samsung’s argument that this breach was carved out from Section 8.2 through
that section’s “except as provided” reference to sections 4.1 and 4.3. Section 4.1 provides that Rambus
23
can “immediately” terminate the SDR/DDR License – without 45 days advance notice – if three
24 consecutive royalty audits show Samsung underpaid by more than 5%. Section 4.3 similarly provides that
the failure of Samsung to make three consecutive royalty payments on a timely basis is “grounds for
25 immediate termination.” Thus, when the parties agreed in Section 8.2 to termination on 45-days notice for
any uncured failure to perform a contractual obligation “[e]xcept as provided in” sections 4.1 and 4.3, the
26 carve-out was meant to preserve Rambus’s ability to immediately terminate for multiple late payments or
multiple findings of underpayment through royalty audits. Any other failure to perform a contractual
27 obligation – including the failure to give the auditors the information needed to perform a proper audit – is
subject to the terms of section 8.2, which entitled Rambus to terminate 45 days after giving notice of
28 Samsung’s breach.
6088127.1 -85- C 05-00334, 05-02298 RMW
1 Samsung accuse Rambus of negotiating in bad faith. See Proposed Finding of Fact No. 279.
2 64. Indeed, Samsung’s own 30(b)(6) designee on the 2005 negotiations agreed
3 that Rambus made its best good-faith efforts to renegotiate in 2005. See Proposed Finding of Fact
4 No. 280.
5 65. Under the law, and the common sense interpretation of Section 8.5, a
6 contractual provision that the parties will negotiate in good faith negotiations does not obligate
7 the parties to reach a deal. To the contrary, it requires good faith negotiations, which may or may
8 not be successful at achieving a mutually satisfactory deal.
9 66. As Samsung’s economist explained, economic theory recognizes that
10 “different people can place different views on [the value of an asset]” and “you can have good
11 faith negotiations but not a deal.” Proposed Finding of Fact No. 281.
12 67. Courts concur. “Good faith [does] not require [a party] to accede to …
13 one-sided modifications.” Auerbach v. Great Western Bank, 74 Cal. App. 4th 1172, 1191-92
14 (1999). See also Phoenix Mut. Life Ins. Co. v. Shady Grove Plaza Ltd. Partnership, 734 F. Supp.
15 1181, 1190 (D. Md. 1990) (“The duty [to bargain in] good faith . . . does not prohibit a party from
16 bargaining to its own economic advantage….”). The Seventh Circuit summarized the rule well in
17 A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group, 873 F.2d 155,
18 159 (7th Cir. 1989):
19 In a business transaction both sides presumably try to get the best of
the deal. That is the essence of bargaining and the free market.
20 And in the context of this case, no legal rule bounds the run of
business interest. So one cannot characterize self-interest as bad
21 faith. No particular demand in negotiations could be termed
dishonest, even if it seemed outrageous to the other party. The
22 proper recourse is to walk away from the bargaining table, not to
sue for “bad faith” in negotiations.
23
68. The failure of the parties to agree is not a breach of the duty to negotiate in
24
good faith and thus there is no breach of Section 8.5
25
2. Samsung’s Breach Of The SDR/DDR License Released Rambus From Any
26 Renegotiation Obligation Otherwise Required Under Section 8.5.
27 69. Rambus also was not in breach of Section 8.5 because Rambus had no
28 contractual obligation to negotiate while Samsung was in breach of the audit provisions of the
6088127.1 -86- C 05-00334, 05-02298 RMW
1 SDR/DDR License.
2 70. By its express terms, the renegotiation obligation in Section 8.5 applies
3 only “[a]ssuming that this Agreement has not been terminated and that Samsung is not in breach
4 hereof.” Exh. 4226, § 8.5 (emphasis added). This language means that, even absent termination
5 of the SDR/DDR License, the parties agreed that Rambus would not have any contractual
6 obligation to negotiate with Samsung for a successor agreement during a period when Samsung
7 was in breach of the existing agreement.
8 71. As set forth above, Samsung was in breach of its audit-related obligations
9 under Section 4.1 of the SDR/DDR License beginning on July 9, 2004 at latest and remained in
10 breach of those obligations throughout the remainder of the contract term. See Proposed Findings
11 of Fact Nos. 224-237. As a result, Rambus had no obligation to renegotiate at all, let alone any
12 obligation under the guise of Section 8.5 to give Samsung the economic benefit of any terms it
13 offered to other licensees.
14 72. Samsung’s argument that Rambus waived any breach by continuing to
15 accept payment under the SDR/DDR License is without merit. First, Section 8.5 expressly
16 provides that Rambus’s duty of renegotiation arises only if the Agreement both “has not been
17 terminated and that Samsung is not in breach hereof.” Were Rambus required to terminate the
18 Agreement in order to invoke this express exception to its renegotiation obligation, the language
19 “and that Samsung is not in breach hereof” would be rendered meaningless – an outcome
20 prohibited under California law. See City of Atascadero v. Merrill Lynch, Pierce, Fenner &
21 Smith, Inc., 68 Cal. App. 4th 445, 473 (1998) (“Courts must interpret contractual language in a
22 manner which gives force and effect to every provision, and not in a way which renders some
23 clauses nugatory, inoperative or meaningless.”).
24 73. By making Rambus’s renegotiation duty conditional upon both the
25 SDR/DDR License remaining in effect and Samsung’s not being in breach, the parties made clear
26 that Rambus did not have to terminate the agreement in order to be excused from its renegotiation
27 obligation. Instead, Rambus could continue to insist on Samsung’s compliance with the other
28 provisions of the SDR/DDR License – including payment of royalties for its licensed products –
6088127.1 -87- C 05-00334, 05-02298 RMW
1 without being forced to negotiate for a successor agreement with a party who had not honored
2 the current agreement.
3 74. Second, the facts are clear that, throughout the period of Samsung’s non-
4 compliance with the audit, Rambus expressly and repeatedly informed Samsung that it was in
5 breach and that the breach had not been cured. As set forth in the findings, Rambus informed
6 Samsung of this fact in July 2004, again informed Samsung of its non-compliance in February
7 2005, and once again informed Samsung on April 1, 2005 that its ongoing breach continued to be
8 uncured. See Proposed Findings of Fact Nos. 234-236. Nor could Rambus have waived this
9 breach in any event because the SDR/DDR License includes a non-waiver provision stating that
10 “[t]he failure of either party to enforce at any time the provisions of this Agreement . . . shall in
11 no way be construed to be a present or future waiver of such provisions, nor in any way affect the
12 right of either party to enforce each and every such provision thereafter.” Exh. 4226, § 10.10.
13 Rambus thus never waived Samsung’s breach of its audit obligations.
14 75. Third, even if Rambus had waived its right to assert an audit breach by
15 accepting Samsung’s payments during the periods before Rambus terminated the SDR/DDR
16 License, it is undisputed that Samsung did not make any payment for the second quarter of 2005
17 despite the fact that the SDR/DDR License remained in effect throughout April, May, and the
18 first several days of June. Trial Tr. 337:19-339:19 (testimony of Mr. Shim). Samsung’s waiver
19 theory appears to be that Rambus waived its audit breach claim for each quarter when it accepted
20 payment for that quarter, which occurred on a time-lagged basis after the close of the quarter. As
21 discussed above, after giving another in a series of notifications to Samsung about its breach in
22 Mr. Blumberg’s April 1, 2005 letter, Rambus terminated the SDR/DDR License on June 6, 2005,
23 before Samsung made a payment for the April-June time period. Thus, Samsung did not make,
24 and Rambus did not accept, any payment for that period and thus cannot be found to have waived
25 Samsung’s ongoing breach during that time period.
26 3. No Damages Are Available for Rambus’s Alleged Breach.
27 76. Even if this Court were to hold that Rambus breached its duty under
28 Section 8.5 – and for the reasons set forth above, it did not – Samsung is not entitled to damages
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1 for any such alleged breach. First, Samsung seeks to recover only expectation damages, which
2 are unavailable as a matter of California law for the breach of a duty to negotiate in good faith.
3 Second, Samsung’s claim for damages is entirely speculative; simply put, Samsung cannot claim
4 benefits under the hypothetical terms of an agreement the parties never made.
5 a. California Law Precludes Recovery of Expectation Damages for
Breach of a Duty To Negotiate in Good Faith.
6
77. Until 2002, no California court had held that the breach of a duty to
7
negotiate in good faith gives rise to a cause of action. Vestar Dev. II, LLC v. Gen. Dynamics
8
Corp., 249 F.3d 958, 960-61 (9th Cir. 2001) (noting “the possibility that agreements to negotiate
9
may be unenforceable as a matter of law in California”); Copeland v. Baskin Robbins U.S.A., 96
10
Cal. App. 4th 1251, 1256 (2002) (“No reported California case has held breach of a contract to
11
negotiate an agreement gives rise to a cause of action for damages.”).
12
78. In 2002, however, a California appellate court issued the first published
13
decision holding that a cause of action will lie under California law for breach of a contract to
14
negotiate. Copeland, 96 Cal. App. 4th at 1255-60.
15
79. The Copeland court recognized the dangers inherent in this new cause of
16
action. It warned that the “uncertain concept” of “bad faith” should not permit an aggrieved party
17
to claim the benefit of a contract that was never consummated. Id. at 1260. Accordingly,
18
Copeland restricted the damages available to a plaintiff in duty-to-negotiate cases. The Court
19
stated that “the appropriate remedy for breach of a contract to negotiate is not damages for the
20
injured party’s lost expectations under the prospective contract but damages caused by the
21
injured party’s reliance on the agreement to negotiate.” Id. at 1260-61 (emphasis added).
22
80. The Copeland court thus recognized that awarding expectation damages
23
based on the terms of a unformed agreement would be contrary to the longstanding rule of
24
California law that agreements to agree are unenforceable. Id. at 1256 & n.4. The court
25
explained that this limitation on recovery was necessary due to the inherently speculative and
26
uncertain nature of providing expectation damages on the basis of a hypothetical and inchoate
27
agreement. It stated:
28
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1 For obvious reasons, damages for breach of a contract to negotiate

an agreement are measured by the injury the plaintiff suffered in
2 relying on the defendant to negotiate in good faith. This measure
encompasses the plaintiff’s out-of-pocket costs in conducting the
3 negotiations and may or may not include lost opportunity costs.
The plaintiff cannot recover for lost expectations (profits) because
4 there is no way of knowing what the ultimate terms of the
agreement would have been or even if there would have been an
5 ultimate agreement.
6 Id. at 1262-63. The Copeland decision thus established a clear rule that expectation damages are
7 unavailable for breach of a duty to negotiate. Indian Ridge Crest Gardens v. City of Rancho
8 Palos Verdes, No. B183504, 2006 WL 3462106, at *3 (Cal. Ct. App. Dec. 1, 2006) (“There is no
9 recovery for lost profits, in that there is no way of knowing whether good faith negotiations
10 would have resulted in an agreement and, if so, the terms of that agreement.” (emphasis added)).14
11 81. Here, Samsung does not seek reliance damages. It has presented no
12 evidence of any damages sustained in reliance upon Rambus’s commitment to negotiate a
13 renewal agreement in good faith. Indeed, Samsung has expressly disclaimed any claim for such
14 reliance damages. Trial Tr. at 96 (opening statement by counsel for Samsung).
15 82. Instead, Samsung seeks only expectation damages – that is, the value of the
16 renewal agreement that the parties never made. For this reason, even if it had been able to prove
17 that Rambus breached its duty to negotiate in good faith for a renewal agreement (a claim, as
18 indicated above, that is not supported by the evidence), Samsung is nonetheless prohibited under
19 Copeland from recovering expectation damages for the benefit of that never-formed renewal
20 agreement.
21
22
23
14
24 During closing argument, Samsung’s counsel placed heavy reliance on a Seventh Circuit case applying
Illinois law, which is of course not applicable here. See ‘334 SAC ¶¶ 220-21; ‘2298 SAC ¶¶ 192-93. In
25 any event, the case is instructive insofar as Judge Posner notes that, as a practical matter, determining
expectation damages for a breach of a duty to negotiation may be an impossible task. See Venture Assocs.
26 Corp. v. Zenith Data Sys. Corp., 96 F.3d 275, 278-79 (7th Cir. 1996) (Posner, J.) (noting, in the context of
a case governed by Illinois law, that a claim for expectation damages based on the breach of a duty to
27 negotiate “rests on somewhat shaky foundations” because it proceeds from the mere “hypothesis” that the
parties would have reached agreement, and further, requires courts to undertake the “insuperable” task of
28 determining “what those terms would have been”).
6088127.1 -90- C 05-00334, 05-02298 RMW
1 b. Expectation Damages Are Speculative, and Therefore Barred, Because

There Is No Way of Knowing Whether or On What Terms Samsung
2 and Rambus Would Have Reached a Renewal Agreement.
3 83. California law requires that damages be clearly ascertainable and proven
4 with certainty. Cal. Civ. Code § 3301 (“Damages must be certain. No damages can be recovered
5 for a breach of contract which are not clearly ascertainable in both their nature and origin.”).
6 84. Courts applying California law have repeatedly rejected attempts to impose
7 binding legal obligations or award expectation damages on the basis of a failed agreement,
8 notwithstanding prior promises to negotiate a deal, modify an existing contract, or otherwise work
9 toward a new agreement. Beck v. Am. Health Group Int’l, Inc., 211 Cal. App. 3d 1555, 1562
10 (1989) (“Preliminary negotiations or an agreement for future negotiations are not the functional
11 equivalent of a valid, subsisting agreement.”); Ablett v. Clauson, 43 Cal. 2d 280, 285 (1954)
12 (“The rule is well established in this state, and, in conformity with the weight of authority in other
13 states, it has been held that an option agreement which leaves an essential term to future
14 agreement is not enforceable.”); Autry v. Republic Prods., Inc., 30 Cal. 2d 144, 151-52 (1947)
15 (“There is no dispute that neither law nor equity provides a remedy for breach of an agreement to
16 agree in the future. . . . The court may not imply what the parties will agree upon.”).
17 85. Indeed, the Ninth Circuit and the California Court of Appeal have rejected
18 claims, such as Samsung’s, based on the alleged breach of a duty to negotiate, precisely because it
19 is impermissible to award relief based on the unknown terms of an unformed agreement. Vestar,
20 249 F.3d at 962 (“There is no way to know what the terms of the eventual sale would have been –
21 or even if a deal would have been reached. Accordingly, on these facts, assessing lost profits by
22 the hypothetical terms of a never-formed deal would require impermissible speculation.”);
23 Copeland, 96 Cal. App. 4th at 1263 (“The plaintiff cannot recover for lost expectations (profits)
24 because there is no way of knowing what the ultimate terms of the agreement would have been or
25 even if there would have been an ultimate agreement.”); Indian Ridge Crest Gardens, 2006 WL
26 3462106, at *3 (“There is no recovery for lost profits, in that there is no way of knowing whether
27 good faith negotiations would have resulted in an agreement and, if so, the terms of that
28 agreement.”).
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1 86. The California case that Samsung relies on in its Trial Brief to support its
2 claim for expectation damages is inapposite to the circumstances of this case. In Coachella
3 Valley Water Dist. v. Imperial Irrigation Dist., Nos. D049610, D049636, 2007 WL 2822766 (Cal.
4 Ct. App. Oct. 1, 2007), the parties entered into a Compromise Agreement in 1934 in order to
5 obtain federal financing for a canal. Id. at *1. This agreement provided that the parties “will,
6 within a reasonable time . . . execute a good and sufficient lease agreement” pertaining to the
7 operation, use, sale, and control of a power plant at the canal. Id. at *2-3. The Compromise
8 Agreement contained specific terms, including, among others, terms regarding periodic payments,
9 based on a rate of eight percent of net proceeds, to be paid by the lessor, as well as specific
10 formulae for determining the net proceeds to which the royalty rate was to be applied. Id. at *3.
11 For the next half-century, the parties understood their legal obligations and conformed their
12 conduct to the precise terms of the Compromise Agreement. Id. at *3-5. When a dispute
13 ultimately arose about the payments owed by one water district to the other, the defendant water
14 district conceded that the terms of the Compromise Agreement were sufficiently specific to be
15 enforceable, id. at *13 n.3, and the court accordingly held that “the parties’ conduct over almost
16 50 years showed they believed the provisions of section 17 of the Compromise Agreement were,
17 by themselves, definite enough to determine their rights.” Id. at *13. The court, moreover,
18 explained that the Compromise Agreement included “19 fairly specific conditions which the
19 prospective lease was in fact required to contain” and thus there was “a fairly detailed means of
20 determining what the terms of a lease would provide.” Id.
21 87. Here, by contrast, Rambus, unlike the defendant in Coachella, has never
22 taken the position that the parties reached agreement on any terms that would have formed the
23 basis of a renewal license, much less that any such agreed-upon terms were specific enough to
24 provide a “clearly ascertainable” measure of damages. Cal. Civ. Code § 3301.15
25
15
During closing, Samsung’s counsel also argued that the Auerbach case provides further support for
26 Samsung’s interpretation of the rule in Copeland regarding availability of expectation damages. Trial Tr.
1123:22-1124:6. As a threshold matter, Auerbach cannot shed any light on Copeland because it was
27 decided in 1999, three years before Copeland was issued. In any event, the holding in Auerbach was that
expectation damages were unavailable because they would require the court “presume[] the outcome of
28
good faith bargaining sessions,” which the court found to be too speculative to undertake. Auerbach v.
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1 88. Moreover, the SDR/DDR License itself clearly does not provide the basis
2 for an award of damages with any degree of certainty. Unlike the 19 specific conditions
3 established in the Compromise Agreement, the SDR/DDR License specifies only that the parties
4 would engage in negotiation “with a view to achieving a mutually satisfactory patent license
5 agreement.” Exh. 4226 § 8.5. In sharp contrast to the language that Samsung originally
6 proposed, which would have required the royalties under any renewal agreement to be capped by
7 those contained in the initial agreement, see Proposed Finding of Fact No. 195, Section 8.5 of the
8 SDR/DDR License specifies no specific terms for inclusion in any potential renewal license.
9 89. The evidence further shows that, in the course of renegotiating, the parties
10 reached no agreement as to any key terms of a successor agreement, thus precluding an award of
11 expectation damages under any circumstance. Although Rambus presented an offer for a
12 successor agreement in February 2005, Samsung did not accept this offer. Trial Tr. at 962-64
13 (testimony of Ira Blumberg) (indicating that Samsung was “interested in a renewal” and proposed
14 “high-level terms” but “didn’t make any specific proposals” and “did not make any substantive
15 proposal or definite proposal on a price that Samsung would be willing to pay”). Even Samsung
16 attorney Jay Shim, who provided two different accounts of the history of renewal negotiations
17 that took place between Rambus and Samsung (one on direct and another the next day on re-
18 direct), never suggested that the parties actually reached any agreement on the most important
19 terms of a renewal license. Compare id. at 297 (testimony of Jay Shim) (“We talked about the
20 renewal terms perhaps in general. I don’t think we got to the specifics.”), with id. at 452-55
21 (testimony of Jay Shim) (suggesting upon a refreshed recollection that renewal negotiations
22 included discussion of products and patents to be covered, but not “specifically how much
23 money”).
24 90. Because an award of expectation damages would be based on “pure
25 speculation” as to the terms of a successor agreement between Rambus and Samsung, Samsung’s
26
27
Great Western Bank, 74 Cal. App. 4th 1172, 1191-92 (1999). Thus, this decision supports Rambus’s
28 position rather than Samsung’s.
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1 claim to such damages “cannot be sustained” under California law. Auerbach, 74 Cal. App. 4th
2 at 1192 (reversing an award of expectation damages based on a contractual commitment to
3 negotiate a “modification” of an existing loan agreement); Copeland, 96 Cal. App. 4th at 1263;
4 Vestar, 249 F.3d at 962; Beck, 211 Cal. App. 3d at 1562; Ablett, 43 Cal. 2d at 285; Autry, 30 Cal.
5 2d at 151-52.
6 E. Count III: Breach of the Implied Duty of Good Faith and Fair Dealing
7 91. Under California law, a covenant of good faith and fair dealing is implied
8 in every contract. Foley v. Interactive Data Corp., 47 Cal. 3d 654, 684 (1988).
9 92. Count III of Samsung’s SAC alleges that Rambus breached the duty of
10 good faith and fair dealing of Section 3.8 and 8.5 of the SDR/DDR License. ‘2298 SAC ¶¶ 191-
11 203; ‘334 SAC ¶¶ 219-231. These are discussed separately below.
12 1. Section 3.8
13 93. Samsung contends that, even if Rambus was not required to extend to it the
14 terms of the Infineon Settlement Agreement for the second quarter of 2005 by the express
15 provisions of Section 3.8 of the SDR/DDR License, the implied covenant of good faith and fair
16 dealing obligated Rambus to do so. The Court disagrees.
17 94. “It is universally recognized the scope of conduct prohibited by the
18 covenant of good faith is circumscribed by the purposes and express terms of the contract.”
19 Carma Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 373 (1992). The
20 covenant serves “to protect the express covenants or promises of the contract . . . .,” and “is aimed
21 at making effective the agreement’s promises.” Foley, 47 Cal. 3d at 683, 690.
22 95. Accordingly, “[a]cts in accord with the terms of one’s contract cannot
23 without more be equated with bad faith.” Balfour, Guthrie & Co. v. Gourmet Farms, 108 Cal.
24 App. 3d 181, 191 (1980) (emphasis added).
25 96. For this reason, California courts have rejected bad faith claims based on
26 an insurer’s denial of benefits that were never due under the insurance contract. See Old Republic
27 Ins. Co. v. FSR Brokerage, Inc., 80 Cal. App. 4th 666, 684-85 (2000); Waller v. Truck Ins.
28 Exchange, Inc., 11 Cal. 4th 1, 36 (1995) (rejecting bad faith claim based on insurer’s proper
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1 denial of benefits, on grounds that “the covenant is implied as a supplement to the express
2 contractual covenants, to prevent a contracting party from engaging in conduct that frustrates the
3 other party’s rights to the benefits of the agreement.”) (emphasis added); Love v. Fire Ins.
4 Exchange, 221 Cal. App. 3d 1136, 1151 (1990) (“Where benefits are withheld for proper cause,
5 there is no breach of the implied covenant”).
6 97. The implied covenant thus proscribes conduct that undermines the
7 fulfillment of a contract’s express provisions. It does not expand the substantive scope of those
8 provisions. Pasadena Live v. City of Pasadena, 114 Cal. App. 4th 1089, 1094 (2004) (“The
9 implied covenant of good faith and fair dealing is limited to assuring compliance with the express
10 terms of the contract, and cannot be extended to create obligations not contemplated by the
11 contract”) (citing 1 Witkin, Summary of Cal. Law (2003 Supp.) Contracts, § 743, p. 449)
12 (emphasis in original); Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 353 n.18 (2000) (“the covenant
13 prevents a party from acting in bad faith to frustrate the contract's actual benefits.”) (emphasis in
14 original).
15 98. In Love, upon which Samsung relied at trial, the plaintiff brought a cause of
16 action for breach of the covenant based on its insurer’s delay in denying its claim for benefits.
17 The Court held that no violation of the covenant had occurred because the claims were untimely,
18 and thus the plaintiff had no right to payment under the insurance contract. Love, 221 Cal. App.
19 3d at 1153.
20 99. The Court noted that a covenant claim would have been proper had the
21 insured had a right to payment, and the insurer engaged in acts which “frustrate[d] the insured’s
22 primary right to receive the benefits of his contract – i.e., prompt compensation for losses,” such
23 as “delayed payment based on inadequate or tardy investigations, [or] oppressive conduct by
24 claims adjusters seeking to reduce the amounts legitimately payable.” Id. at 1153. Under these
25 circumstances, the Court noted, the covenant would serve as “a supplement to the express
26 contractual covenants, to prevent a contracting party from engaging in conduct that (while not
27 technically transgressing the express covenants) frustrates the other party’s right to the benefits of
28 the contract.” Id.
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1 100. As the Court further noted, however, “[a]bsent that primary right [to
2 receive benefits], . . . the auxiliary implied covenant has nothing upon which to act as a
3 supplement, and should not be endowed with an existence independent of its contractual
4 underpinnings.” Id. (first emphasis added; second in original).
5 101. Because the terms of the SDR/DDR License did not obligate Rambus to
6 offer Samsung the terms of the Infineon Settlement Agreement, it was not a breach of the implied
7 covenant of good faith and fair dealing for Rambus to act consistently with the terms of the
8 contract.
9 102. Similarly, because the terms of the SDR/DDR License do not include
10 DDR2 and later generation memory products within the scope of licensed products, Rambus did
11 not breach the implied covenant of good faith and fair dealing by not treating such products as
12 licensed under the agreement.
13 2. Section 8.5
14 103. Samsung also contends that, even if Rambus was not required by the
15 express provisions of Section 8.5 to enter into a renewal license having the terms of the Infineon
16 Settlement Agreement, the implied covenant of good faith and fair dealing obligated it to do so.
17 The Court again disagrees.
18 104. Section 8.5 of the SDR/DDR License expressly provided that the parties
19 would negotiate in good faith towards an extension or new agreement. They thus incorporated
20 the “good faith” obligation already implied by California law as an express term of their contract,
21 making a claim for breach of the explicit contract provision co-extensive with a claim for breach
22 of the implied duty of good faith and fair dealing. See Copeland v. Baskin Robbins U.S.A., 96
23 Cal. App. 4th 1251, 1260 (2002) (“when the parties are under a contractual compulsion to
24 negotiate[,] the covenant of good faith and fair dealing attach[es], as it does in every contract.”).
25 Indeed, Samsung’s counsel admitted that “the covenant of good faith and fair dealing . . . is the
26 same as their good faith obligation that’s explicitly in 8.5” Trial Tr. at 1130:2-4.
27 105. Where, as here, “the implied covenant claim seeks simply to invoke terms
28 to which the parties did agree, it is superfluous.” Guz, 24 Cal. 4th at 352.
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1 106. For the reasons stated in Section D, supra, the Court concludes that
2 Rambus did not breach Section 8.5 of the SDR/DDR License. Accordingly, and for the reasons
3 stated therein, Rambus also did not breach the covenant of good faith and fair dealing as it related
4 to that contractual provision.
5 F. Samsung’s Affirmative Defense of Estoppel
6 107. At trial, Samsung alleged that Rambus should be estopped from enforcing
7 the patents in suit against Samsung on worse terms than the “royalty rate” reached in the Infineon
8 Settlement Agreement. As set forth below, Samsung’s estoppel defense fails on several grounds.
9 1. Samsung Failed To Plead Its Estoppel Defense
10 108. As an initial matter, Samsung’s estoppel defense fails because Samsung

11 failed to plead the defense. It is well-established that estoppel is an affirmative defense and must
12 be pled with sufficient information to “give[] the plaintiff fair notice of the nature of the defense.”
13 5 Wright & Miller, Fed. Practice & Proc., § 1274. To meet this requirement, “estoppel must be
14 affirmatively or specially pleaded with the underlying facts supporting the estoppel.” 2 Schwing,
15 Cal. Affirmative Defenses, § 34.10 (2008 ed.); see also Smith v. County of Santa Barbara, 203
16 Cal. App. 3d 1415, 1426 (1988) (dismissing of estoppel claim on ground it was not properly pled
17 before trial and holding that “[a]ll essential elements of estoppel must be alleged and from such
18 facts estoppel must be clearly deducible therefrom.”).
19 109. Samsung did not plead an affirmative defense of estoppel based on the
20 allegations in Counts I-III in its SAC, nor did it set forth this defense theory in the parties’ Joint
21 Supplemental Case Management Conference Statement filed on July 31, 2007.16 Moreover, when
22 Rambus asked Samsung in a contention interrogatory to identify all the facts that support Counts
23 I-III, Samsung made no mention of estoppel or any of the estoppel-related allegations it brought
24 forth at trial and instead merely incorporated the allegations included within its SAC. Trial Tr.
25
16
26 Samsung pled an affirmative defense of estoppel based on other allegations – Rambus’s JEDEC
conduct, the conduct of Neil Steinberg, and the parties’ 1994 RDRAM license agreement – but those
27 aspects of Samsung’s estoppel defense were dismissed with prejudice prior to the September 22, 2008
Trial. See Stipulation and Order Dismissing Portions of Certain Claims and Defenses with Prejudice, Case
28 Nos. 05-00334 (Docket No. 2210) (Sept. 16, 2008).
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1 936:15-938:16. Samsung’s supplemental responses to this interrogatory were provided on

2 October 31, 2007, more than two years after Samsung filed its counterclaims. Although Rambus
3 would have been prejudiced by disclosure of this theory even at this late date, Rambus would
4 have at least been able to undertake discovery with respect to Samsung’s estoppel theory if
5 Samsung had identified this theory at that time. Instead, Samsung made no disclosure of this
6 defense until several weeks before trial during the parties’ negotiation of Samsung’s dismissal of
7 certain of its claims, and Rambus only learned the substance of this defense when Samsung filed
8 its pretrial brief a mere fourteen days before trial.
9 110. The prejudice to Rambus from Samsung’s failure to disclose its new
10 estoppel defense is clear and obvious. Rambus was deprived of any opportunity to address this
11 defense in discovery, let alone in any pre-trial dispositive motions, motions in limine, or in its trial
12 brief. Moreover, both Rambus and the Court have been left to guess at the exact nature of
13 Samsung’s estoppel defense throughout the trial itself, during which the nature of the theory has
14 been at best difficult to discern.
15 111. Samsung’s failure to plead its estoppel theory and related failure to disclose
16 the theory in discovery constitutes an independent ground for its dismissal. See Smith, 203 Cal.
17 App. 3d at 1426 (dismissing on appeal estoppel claim on ground that it was not properly pled
18 before trial and reversing trial court’s ruling allowing consideration of the issue over defendant’s
19 objections). The Court, however, also rejects Samsung’s estoppel allegations on the merits for
20 the reasons set forth below.
21 2. Samsung’s Estoppel Defense Fails As A Matter Of Law
22 112. To the extent that Samsung has offered any information regarding its
23 unpleaded estoppel defense, that defense fails as a matter of law.
24 113. First, Samsung alleges that Rambus is precluded by the doctrine of
25 “estoppel by contract” from arguing that it did not intend Section 3.8 to apply to lump sum
26 payments such as those in the Infineon Settlement Agreement. Although this theory received no
27 mention in Samsung’s closing argument and thus remains less than clear, Samsung’s pre-trial
28 brief suggests that Samsung’s “estoppel by contract” claim is based on certain statements about
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1 the future rates Rambus intended to offer other licensees as set forth in the “whereas clauses” of
2 the SDR/DDR License. See Samsung’s Trial Brief at 11, n.2. The Court concludes that the
3 doctrine of “estoppel by contract” has no application here.
4 114. California has codified the doctrine of “estoppel by contract” in California
5 Evidence Code section 622, which provides that “[t]he facts recited in a written instrument are
6 conclusively presumed to be true as between the parties thereto.” Cal. Evid. Code § 622
7 (emphasis added).
8 115. The statements in the whereas clauses upon which Samsung relies are
9 statements about expected future conduct, not recitations of existing fact. Specifically, they are
10 statements regarding royalty rates that Rambus expected to charge third parties in the future.
11 Such statements cannot give rise to a claim of estoppel under California law. As the Northern
12 District of California noted in Darling Int’l Inc. v. Baywood Partners, Inc., No. C-05-3758 EMC,
13 2007 WL 2904034 (N.D. Cal. Oct. 2, 2007), “under California law, estoppel by contract applies
14 only to stated facts and not future conduct.” Id. at *6 (emphasis added). Samsung fails to cite a
15 single California case, and the Court is aware of none, in which the doctrine of estoppel by
16 contract is applied to statements of future conduct and/or a parties’ expectation of future events.
17 116. Samsung’s estoppel by contract theory also cannot be accepted because it
18 would transform statements set forth in non-binding recitals into binding, operative terms of the
19 agreement. This would contradict the well-established rule that, while recitals may provide
20 context about the circumstances surrounding the agreement, they cannot be permitted to control
21 over the express provisions of the contract, or create any rights beyond those established by the
22 operative provisions of the contract. See Proposed Conclusion of Law No. 7; see also
23 McDonough v. Chu Chew Shong, 21 Cal. App. 2d 257, 259 (1937); Patwardhan v. Kale, No.
24 E031792, 2003 WL 21130236, at * 5 (Cal. Ct. App. May 16, 2003); A.S.D. v. W. Mun. Water
25 Dist. of Riverside County, No. E030189, 2002 WL 31820335 at *8 (Cal. Ct. App. Dec. 17, 2002);
26 17A C.J.S. (2008) Contracts, § 317; Grynberg v. FERC, 71 F.3d 413, 416 (D.C. Cir. 1995); Rose
27 v. M/V “Gulf Stream Falcon,” 186 F.3d 1345, 1350 (11th Cir. 1999); Atl. Mut. Ins. Co. v. Metron
28 Eng’g & Constr. Co., 83 F.3d 897, 899 (7th Cir. 1996).
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1 117. Accordingly, the doctrine of estoppel by contract is inapplicable, and

2 Samsung’s estoppel by contract defense fails as a matter of law.
3 118. Second, Samsung contends that Rambus is equitably estopped from taking
4 any actions against Samsung that are inconsistent with the terms of the Infineon Settlement
5 Agreement because of statements made by Rambus representatives during the negotiations of the
6 SDR/DDR License. Specifically, Samsung contends that it relied on Rambus’s promises: (i) that
7 Samsung would suffer no competitive disadvantage relative to its competitors then in litigation
8 and (ii) that Rambus would negotiate with Samsung in good faith to renew or extend the
9 SDR/DDR License prior to the end of its term.
10 119. Through its estoppel defense, Samsung seeks to circumvent the
11 insurmountable legal hurdle that the parol evidence rule creates for its contract claims.
12 Specifically, Samsung seeks to transform evidence of statements made during the negotiations
13 into binding contractual obligations, regardless of whether those statements alter or contradict the
14 actual provisions of the SDR/DDR License. This is improper where, as here, the parties have a
15 written agreement with an express integration clause. See Exh. 4226, § 10.14. As explained in
16 Section B, supra, under the parol evidence rule, “the written agreement supersedes [prior]
17 negotiations and becomes the parties’ sole agreement” and “extrinsic evidence may not ‘add to,
18 detract from, or vary the terms of’ that agreement.” Casa Herrera, Inc., 32 Cal. 4th at 345
19 (quoting Pacific Gas & Elec. Co., 69 Cal. 2d at 39).
20 120. Indeed, the California Supreme Court in Casa Herrera specifically rejected
21 the use of the doctrine of estoppel to give independent legal effect to statements or promises made
22 by negotiators in the lead-up to execution of an integrated written agreement, holding that “the
23 doctrine of estoppel . . . has no force against the parol evidence rule.” Casa Herrera, Inc. v.
24 Beydoun, 32 Cal. 4th 336, 345-346 (2004). In Casa Herrera, the Supreme Court reviewed a
25 malicious prosecution claim by a tortilla oven maker who had been the defendant in a prior
26 breach of contract and promissory fraud action by the purchaser of the oven. In the prior lawsuit,
27 the tortilla oven maker prevailed based in part upon a holding by the court of appeals that pre-
28 contract representations made by the oven maker about the expected performance of the oven
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1 were inadmissible parol evidence because those representations fell outside the parties’ integrated
2 written agreement. Id. at 338-40. In the malicious prosecution action, the purchaser of the oven
3 argued that the tortilla oven maker’s victory in the prior action was not a favorable substantive
4 ruling on the merits and thus could not support a claim for malicious prosecution. The Supreme
5 Court rejected this argument, holding that the parol evidence rule is a substantive rule of contract
6 that “determines the enforceable and incontrovertible terms of an integrated written agreement.”
7 Id. at 345. The Court explained that, under the parol evidence rule, all “prior or
8 contemporaneous” statements made during negotiations “are merged in the written contract,
9 which is conclusive in the absence of a plea of actual fraud or mistake.” Id. at 345. As a result,
10 “[t]he written agreement supersedes these negotiations and becomes the parties’ sole agreement.”
11 Id. The Court further held that, in light of the “substantive nature” of the parol evidence rule, “the
12 doctrine of estoppel . . . has no force against the parol evidence rule,” which “effectively
13 immunizes [a party to an integrated written agreement] from liability for prior or
14 contemporaneous statements at variance with the written sales contract.” Id. at 346-47; see also
15 Iconix, Inc. v. Tokuda, 457 F. Supp. 2d 969, 978 (N.D. Cal. 2006) (rejecting estoppel-based claim
16 based on pre-contract statements made during negotiations because “the California Supreme
17 Court has specifically held that the doctrine of estoppel does not affect application of the parol
18 evidence rule.”).
19 121. Samsung’s estoppel defense attempts to use parol evidence of pre-contract
20 statements by negotiators in precisely the way that the Supreme Court held to be improper in
21 Casa Herrera, Inc. Because the parol evidence rule bars the use of estoppel to create and enforce
22 supplementary obligations that are not found in the parties’ written agreement, Samsung’s
23 estoppel defense fails as a matter of law.17
24
25 17
Although Samsung appears to rely on the doctrine of equitable estoppel rather than promissory estoppel,
the result would be the same if Samsung’s estoppel argument were considered to be a form of promissory
26 estoppel. A promissory estoppel claim would be improper because the parties already have a written
agreement that includes the exchange of consideration between the parties. Under California law “the
27 promissory estoppel doctrine is limited ‘to cases where no benefit flows to the promisor.’” Walker v. KFC
Corp., 728 F.2d 1215, 1220 (9th Cir. 1984) (quoting and citing California cases). “Promissory estoppel is
28
not a doctrine designed to give a party to a negotiated commercial bargain a second bite of the apple in the
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1 122. As explained above, the Court concludes that Rambus did not breach
2 Section 3.8, Section 8.5, or the implied duty of good faith and fair dealing arising from those
3 provisions. See Proposed Conclusions of Law Nos. 18, 27, 33, 46, 68, 101, & 106. Samsung’s
4 assertion of the doctrine of estoppel does nothing to alter these conclusions.18
5 3. Samsung Failed To Satisfy Its Burden of Proof On Its Estoppel Defense
6 123. Even if Samsung’s estoppel defense were not barred as a matter of law for
7 the reasons set forth above, the defense would fail because Samsung failed to prove its elements
8 at trial.
9 124. To establish an estoppel defense, Samsung would have the burden to
10 prove: “(a) a representation or concealment of material facts (b) made with knowledge, actual or
11 virtual, of the facts (c) to a party ignorant, actually and permissibly, of the truth (d) with the
12 intention, actual or virtual, that the ignorant party act on it, and (e) that party [relied] on it [to his
13
14
event it fails to prove a breach of contract.” Id This is, moreover, consistent with the law of other
15 jurisdictions. See, e.g., All-Tech Telecom, Inc. v. Amway Corp., 174 F.3d 862, 869 (7th Cir. 1999)
(collecting case law from various jurisdictions holding that “[a] promisee cannot be permitted to use the
16 doctrine [of promissory estoppel] to do an end run around . . . the parol evidence rule”).
18
17 In support of its estoppel and good-faith claims, Samsung relies on an interim decision issued in 1987 by
an administrative law judge at the International Trade Commission. See In the Matter of Certain Dynamic
18 Random Access Memories, Components Thereof, and Products Containing Same (“In re DRAMS”), 1987
WL 450980, USITC Inv. No. 337-TA-242 (June 8, 1987) (Initial Determination). That decision – in
19 which Samsung was found to have infringed various DRAM-related patents – is inapposite to this case for
several reasons. First, this interim decision by the ALJ was not a final decision by the International Trade
20 Commission – in fact, the very findings and rulings upon which Samsung now relies were vacated by a
subsequent order of the ITC and were never reviewed. In the Matter of Certain Dynamic Random Access
21 Memories, Components Thereof and Products Containing Same, 1987 WL 450856, USITC Inv. No. 337-
TA-242, Pub. No. 2034 (Sept. 21, 1987) (Commission Action and Order). Second, even if this had been a
22 final decision, its conclusions would not be binding upon this court. Texas Instruments v. Cypress
Semiconductor Corp., 90 F.3d 1558, 1569 (Fed. Cir. 1996) (noting that “ITC decisions are not binding on
23
district courts” and that a “district court can attribute whatever persuasive value to the prior ITC decision
24 that it considers justified”). That In re DRAMS should not be accorded any persuasive value is
underscored by the fact that the ALJ clearly misapplied Texas law (the law governing the dispute at issue)
25 in enforcing a promise to negotiate in good faith. In fact, Texas law has long held such promises to be
unenforceable. Maranatha Temple, Inc. v. Enterprise Prods. Co., 893 S.W. 2d 92, 104 (Tex. App.
26 Houston 1st Dist. 1994) (“Courts have long held that an agreement to enter into negotiations in the future
is unenforceable. The fact that this particular agreement to negotiate in the future includes a term calling
27 for the appellees to put forth a ‘good faith effort’ in the negotiations does not remove the agreement from
this rule. The agreement, whatever its specific language, is still an agreement to enter into future
28 negotiations, and, as such, it is unenforceable.”).
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1 injury].” 13 Witkin, Summary 10th (2005) Equity, § 191 at 527-28; Wood v. Blaney, 107 Cal.
2 291, 295 (1895); Wells Fargo Bank, 32 Cal. App. 4th at 438. Moreover, in order to meet the
3 reliance requirement, the party seeking an estoppel must demonstrate that the reliance was
4 reasonable. Martinez v. Scott Specialty Gases, Inc., 83 Cal. App. 4th 1236, 1248 (2000) (holding
5 that “[e]stoppel requires, among other things, reasonable reliance on the other party’s actions”
6 and rejecting estoppel where “plaintiffs could not reasonably have been misled”) (emphasis in
7 original).
8 125. There can be no estoppel where any one of these elements is missing. See
9 State Compensation Ins. Fund, 40 Cal. 3d at 16; Wells Fargo Bank, 32 Cal. App. 4th at 438.
10 Moreover, every aspect of the claim must be “substantiated in every particular.” Id.
11 126. Samsung neither alleges nor established that Rambus represented or
12 concealed any material facts. As explained above, Samsung’s estoppel defense theory rests on
13 alleged statements and promises of future conduct – Rambus’s future third-party licensing
14 activity and renegotiation of the Samsung agreement at the end of its term – not existing facts.
15 See Proposed Conclusion of Law No. 115. On this basis alone, Samsung’s estoppel claim must
16 fail.
17 127. Further, Samsung could not reasonably have relied on Rambus’s alleged
18 promises that Samsung would be granted protections in perpetuity vis-à-vis its competitors in
19 litigation with Rambus beyond those set forth in the language of the SDR/DDR License itself.
20 Samsung is a sophisticated company that was represented by experienced lawyers in the 2000
21 licensing negotiations with Rambus. Trial Tr. at 383:12-18 (testimony of Jay Shim); V102
22 (2/6/2001 Depo. of Charles Donohoe at 87:1-13); V103 (5/14/2008 Depo. of Charles Donohoe at
23 63:15-23). As noted, the parties, through their lawyers, established a fully-integrated written
24 agreement that expressly established California law as the applicable state law. In California, the
25 Supreme Court had long held that, under the parol evidence rule, evidence of prior or
26 contemporaneous agreements or understandings between the contract negotiators cannot be used
27 to “add to, detract from, or vary the terms” of the parties’ written agreement. Pacific Gas & Elec.
28 Co., 69 Cal. 2d at 37. To the extent Samsung purports to have relied upon its own interpretation
6088127.1 -103- C 05-00334, 05-02298 RMW
1 of Section 3.8 based on extra-contractual statements made by Rambus’s negotiators that were not
2 incorporated into the terms of the SDR/DDR License, such reliance would be inherently
3 unreasonable.
4 128. Samsung also could not reasonably have relied on the alleged promise that
5 Rambus would offer the “Infineon deal” in any renewal or extension of the SDR/DDR License
6 because such reliance would have contradicted Section 8.5, which is not an automatic renewal
7 provision, expressly states that the parties agreed only to negotiate in good faith “with a view to
8 achieving a mutually satisfactory” agreement, and identifies no terms that must be carried over
9 into any new licensing agreement. Exh. 4226, § 8.5. To the extent Samsung purports to have
10 relied upon its self-serving interpretation of Section 8.5 as a “de facto” automatic renewal
11 provision, such reliance would be flatly inconsistent with the language of the contract and
12 inherently unreasonable.
13 129. Finally, because equitable estoppel is, as its name suggests, an equitable
14 defense, Samsung must come to the Court with clean hands in connection with the prosecution
15 and defense of this case. Although not necessary to the Court’s determination in light of the
16 Findings of Fact and Conclusions of Law described above, the evidence showing that Samsung
17 destroyed documents in 2005 at a time after it had a duty to preserve them indicates that Samsung
18 comes to the Court with unclean hands, and provides an independent basis for rejecting
19 Samsung’s estoppel claim.
20
21 DATED: October 8, 2008 Respectfully submitted,
22
______/s/ Gregory P. Stone___________
23 Gregory P. Stone
Keith R. D. Hamilton
24 MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, 35th Floor
25 Los Angeles, California 90071-1560
(213) 683-9100
26
27
28
6088127.1 -104- C 05-00334, 05-02298 RMW
1 Burton A. Gross
Carolyn Hoecker Luedtke
2 Miriam Kim
MUNGER, TOLLES & OLSON LLP
3 560 Mission Street, 27th Floor
San Francisco, CA 94105
4 (415) 512-4027
5 Attorneys for Plaintiff and Counterclaim-Defendant
RAMBUS INC.
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6088127.1 -105- C 05-00334, 05-02298 RMW

Rambus'S Proposed Post-Trial Findings of Fact and Conclusions of Law With Respect To Samsung'S Counts I-Iii and Estoppel Defense

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Rambus'S Proposed Post-Trial Findings of Fact and Conclusions of Law With Respect To Samsung'S Counts I-Iii and Estoppel Defense

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Case 5:05-cv-00334-RMW Document 2360 Filed 10/08/2008 Page 1 of 112

1 GREGORY P. STONE (#78329)

12 Attorneys for Plaintiff and Counterclaim-Defendant

21 PUBLIC REDACTED VERSION

25 SAMSUNG ELECTRONICS CO., LTD., et

3 PROPOSED FINDINGS OF FACT ............................................................................................... 1

3 1. Samsung Failed To Plead Its Estoppel Defense........................................ 97

4 A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group,

3 International Ass’ n of Fire Fighters v. City of San Leandro,

25 STATUTES AND RULES

26 Cal. Bus. & Prof. Code § 17200.............................................................................................. 2, 3

3 Cal. Civ. Code § 1641 .........................................................................................................25, 28

11 A. Background Facts and Procedural History

12 1. Rambus was founded in 1990 by two professors, Dr. Michael Farmwald

1 • Count II – Breach of Section 8.5 of the SDR/DDR License;

1 C. The SDR/DDR License Agreement

1 e. whether the parties negotiated in good faith.

3 a. Section 1.7 Defines a Narrow Set of “Licensed Products” by Relying on

1 3. Off-Chip Driver Calibration Is Not One of the Eleven

1 k. The “Licensed Products” Defined in Section 1.7 Do Not Include DDR2,

1 4. Section 8.5: The Duty to Negotiate in Good Faith

1 b. Section 8.5 Does Not Contain An Automatic Renewal Provision.

1 e. The 2001 Amendment Contained A Provision for Certain Most

1 D. Samsung Was in Breach Of The SDR/DDR License Because It Failed To Comply

1 improper. See Exh. 10260 (Point 4.b); Exh. 10228 at 2.

1 E. Rambus’s Good Faith Renewal Negotiations in 2004 and 2005

1 282. As the foregoing factual findings demonstrate, Rambus negotiated in good

4 A. Samsung’s Claims And Burden Of Proof

1 25. This conclusion is further compelled by consideration of the language of

14 a. There Was No Breach Based On Failure To Provide Notice of Infineon

1 satisfactory” to both parties.

1 would have been mere surplusage.12

1 c. There Was No Breach Based On Failure to Reach Agreement On

1 filed suit against Samsung.

1 For obvious reasons, damages for breach of a contract to negotiate

1 b. Expectation Damages Are Speculative, and Therefore Barred, Because

10 108. As an initial matter, Samsung’s estoppel defense fails because Samsung

1 936:15-938:16. Samsung’s supplemental responses to this interrogatory were provided on

1 117. Accordingly, the doctrine of estoppel by contract is inapplicable, and

21 DATED: October 8, 2008 Respectfully submitted,

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