Samsung Electronics v. Rambus (CAFC 2006-1579)

The United States District Court for the Eastern District of Virginia denied Samsung Electronics Co., Ltd.'s (Samsung) motion for attorney fees and issued a lengthy opinion addressing issues relating to the alleged spoliation of evidence by Rambus, Inc. (Rambus), but not relevant to the basis for judgment in favor of Samsung. When Rambus offered to pay Samsung's requested attorney fees in full, the case before the district court became moot. Samsung Elecs. Co. Ltd. v. Rambus, Inc., 439 F. Supp. 2d 524 (E.D. Va. 2006). This court therefore vacates the order of the district court and remands the case to the district court with the instruction that it dismiss Samsung's complaint.

Rambus sued Samsung in Northern California. Samsung counterclaimed with a DJ motion in East Virginia.

The Eastern District of Virginia accepted jurisdiction to hear the case as related to a previously concluded litigation involving the same patents. Rambus Inc. v. Infineon Techs. AG, 164 F. Supp. 2d 743 (E.D. Va. 2001). (Infineon litigation). The patents at issue in that litigation were: U.S. Patent Nos. 5,953,263; 5,954,804; 6,032,214; and 6,034,918, all directed to various dynamic random access memory devices (DRAMs). In that previous litigation, this court, on appeal, had disagreed with the trial court's claim construction and fraud determination. Rambus Inc. v. Infineon Techs. AG, 318 F.3d 1081 (Fed. Cir. 2003). Accordingly, this court remanded. Id. On remand, the district court immediately entertained arguments regarding the spoliation of evidence. From the bench, the district court in Virginia ruled that Rambus had unclean hands due to spoliation of evidence. To avoid issuance of an adverse finding, Rambus quickly settled with Infineon. Accordingly, the trial court properly dismissed that original case against Infineon before entry of any findings or judgment against Rambus.

Rambus also gave up against Samsung, even offering to pay attorney fees in full. Samsung, seeking to smear Rambus, persisted. The district court sympathetically sided with Samsung, though with no payout.

Samsung did not accept the offer for full relief and persisted with its motion for attorney fees. On July 18, 2006 the district court issued an order denying attorney fees because Rambus terminated its claims at a sufficiently early stage in the litigation and because the record was insufficient to establish a causal nexus between the spoliation of evidence and the attorney fees sought by Samsung. Samsung Elecs. Co. Ltd. v. Rambus Inc., 439 F. Supp. 2d at 571-72. This opinion also held that the case was exceptional under 35 U.S.C. § 285, and issued the unpublished spoliation findings from the previously concluded Infineon litigation. Although it denied Samsung the only relief sought, the Virginia district court nonetheless issued a separate opinion on the same day holding that Samsung was the prevailing party. Samsung Elecs. Co. Ltd. v. Rambus Inc., 440 F. Supp. 2d 495 (E.D. Va. 2006).

Rambus appealed. The CAFC let Rambus off the hook. The district court was confused.

An offer for full relief moots a claim for attorney fees. See, e.g., Greisz v. Household Bank, 176 F.3d 1012, 1015 (7th Cir. 1999) (holding that an offer of the full amount of attorney fees eliminates a dispute upon which federal jurisdiction can be based and stating "[y]ou can't persist in suing when you have actually won."). See also Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991) ("Once the defendant offers to satisfy the plaintiff's entire demand, there is no dispute over which to litigate.").

The district court discounted these authorities because they did not involve the "imposition of sanctions." Samsung Elecs. Co. Ltd., v. Rambus Inc., 440 F. Supp. 2d 512, 522 (E.D. Va. 2006). Instead, the district court relied on three cases for the proposition that a trial court retains subject matter jurisdiction to impose sanctions even after the case becomes moot. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395-96 (1990) ("It is well established that that a federal court may consider collateral issues after an action is no longer pending. . . . [An] imposition of a Rule 11 sanction is not a judgment on the merits of an action. Rather it requires the determination of a collateral issue: whether the attorney has abused the judicial process, and if so, what sanction would be appropriate. Such a determination may be made after the principle suit has been terminated."); Willy v. Coastal Corp., 503 U.S. 131, 138 (1992) (quoting the same language from Cooter and holding that even when a court no longer has subject matter jurisdiction it retains jurisdiction to sanction under Rule 11); Perkins v. Gen. Motors Corp., 965 F.2d 597, 602 (8th Cir. 1992) (upholding the district court's decision to impose sanctions under Rule 11 after it lost subject matter jurisdiction due to party settlement).

As these authorities show, a federal trial court enjoys discretion to postpone collateral issues until completion of the principal action. Those collateral issues include costs, fees, and contempt proceedings. Cooter, 496 U.S. at 395-96. Fed. R. Civ. P. 11 sanctions fit into this category of collateral issues. The issue before this court, however, does not involve collateral issues springing from a principal suit. In this instance, the fees are the main issue. In fact the only issue pending before the court was Samsung's motion for attorney fees under 35 U.S.C. § 285. Moreover, 35 U.S.C. § 285 is not a separate "sanctions statute." The only sanction for which section 285 provides is attorneys fees. Because the issue at bar is not a collateral issue and the statute is not a separate sanctions statute in and of itself, the district court lacks jurisdiction beyond full settlement of the fees dispute. The authorities cited by the trial court to retain jurisdiction do not apply in this instance.

In its entirety, 35 U.S.C. § 285 provides: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." This section of Title 35 provides attorney fees in exceptional cases. The statute requires the trial court to find a case "exceptional" before proceeding to consideration of attorney fees. Thus, exceptionality is an element or precondition for the imposition of attorney fees. The statute does not make a finding of exceptionality a separate sanction. Thus, a trial court does not retain jurisdiction to make an "exceptional case" finding.

Accordingly, the district court in this case lacked jurisdiction to issue any further opinions in conjunction with an attorney fees dispute that has ceased to exist. Because the district court's writing is an impermissible advisory opinion, this court vacates that advisory opinion as issued without jurisdiction.

The case is remanded to the district court with the instruction that the court dismiss Samsung's complaint.