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The Federal Circuit Finds Document Retention Policies are Essential for Information Governance

Created: 17 May 2011
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In two decisive blows, the Federal Circuit tipped the litigation scales decisively against Rambus in the long running DRAM memory chip dispute against Micron Technology and Hynix Semiconductor.  The Federal Circuit found that Rambus spoliated evidence by destroying over 300 boxes of documents as part of its pre-litigation “Licensing/Litigation Readiness” strategy.  However, in so doing, the court held that organizations may lawfully discard data by implementing neutral document retention policies.

Significant to that holding was the Federal Circuit’s reasoning regarding when a litigant’s duty to preserve is triggered.  Rambus argued that the duty attaches once litigation is “imminent.”  That position was rejected since it was too generous to alleged spoliators.  Instead, the court applied the long-standing rule that the duty begins when litigation is “pending or reasonably foreseeable.”

By following the axiomatic preservation rule, the Federal Circuit safeguarded the delicate balance between a litigant’s right to obtain relevant information and an organization’s ability to pursue best practices for information governance.  Those practices, termed “good housekeeping” by the court, include “limiting the volume of a party’s files and retaining only that which is of continuing value.”  Therefore, “where a party has a long-standing policy of destruction of documents on a regular schedule, with that policy motivated by general business needs, which may include a general concern for the possibility of litigation, destruction that occurs in line with the policy is relatively unlikely to be seen as spoliation.”

The Federal Circuit’s ruling in these cases makes clear that organizations can and should use document retention protocols to rid themselves of data stockpiles.  Absent a preservation duty or other exceptional circumstances, paring back records pursuant to good faith information governance procedures will be protected under the law.

The cases are Micron Technology, Inc. v. Rambus Inc., --- F.3d ---- (Fed. Cir. May 13, 2011) and Hynix Semiconductor Inc. v. Rambus Inc., --- F.3d ---- (Fed. Cir. May 13, 2011).