Apple v. Samsung Sanction Decision: the Bark Is Worse Than the Bite as Apple and Nokia Overreach in Their Request for Sanctions

by Jeffer Mangels Butler & Mitchell LLP

To resolve Apple and Nokia's request for sanctions against Samsung from Samsung's violation of a protective order, the court ordered written discovery and depositions to determine the extent of the violation. After discovery and several hearing, the court began its analysis by noting that "[a] junior associate missing one redaction among many in an expert report is not exactly a historical event in the annals of big-ticket patent litigation. Even if regrettable, these things can happen, and almost certainly do happen each and every day. But when such an inadvertent mistake is permitted to go unchecked, unaddressed, and propagated hundreds and hundreds of times by conscious - and indeed strategic - choices by that associate's firm and client alike, more significant and blameworthy flaws are revealed."

The court then addressed three separate questions. "First, has its protective order been violated? Second, if the protective order has been violated, does the court have the authority to issue sanctions for those violations? Finally, if the court has the authority to issue sanctions, what factors should it consider in determining whether sanctions are warranted?"

From there, the court found that there is no intent requirement to violate a protective order and that there is no willfulness requirement. The court also concluded under Ninth Circuit law that Rule 37 provided the necessary authority to issue an award of sanctions. The court then determined that it should look at the totality of the circumstances to determine whether sanctions should be awarded.

The court then found that "[o]ne inadvertent mistake resulted in the widespread distribution of confidential information to hundreds of people who were not authorized to have access to it. Each time this information went to a new person who was not authorized to receive it under the protective order, Section 9(b) was violated, and although each individual violation here may have been as inadvertent as the initial missed redaction above, sanctions are warranted here due to the breadth/volume of violations and the fact that Samsung and its outside counsel made a conscious decision to set up a system that would allow violations of that scope to ensue from a mistake that small and, frankly, predictable."

The court also explained that given how the parties vigorously attempted to keep information filed under seal the way in which Samsung treated the information was not acceptable. "The information traded by Apple and Samsung in this case was considered sufficiently valuable by both parties to merit an interlocutory appeal to the Federal Circuit to keep it protected from the public, the vast majority of whom have absolutely no interest in it and no ability to use the information even if they were to discover it. It is sufficiently valuable to merit hundreds and hundreds of pages of sealing motions, with thousands of pages more in supporting declarations. If keeping this information from the public is worth all of that, then surely, logically, it would be worth a second, or even a third, round of review before producing it to a competitor corporation, who would know exactly how to exploit it. Yet this basic precaution was not put in place. Because of this "1 lawyer deep" structure, a single inadvertent mistake led to confidential information being widely distributed within Samsung. This is unacceptable."

The court then faulted Samsung and its executives for downloading and extensively circulating litigation documents. "Even with a "1 lawyer deep" structure, the information may yet have been contained if Samsung and its executives had not adopted the practice of downloading and circulating litigation documents to the far comers of the globe. Samsung, however, decided to mine the documents produced in the litigation for all the value they could possibly extract, an understandable position given how expensive the information was, and its legitimate goal of maintaining consistent positions in all its litigation across the world. That said, there is always a risk that something slips through, and Samsung could just as easily have chosen to minimize the individuals exposed to litigation documents in case it did. But it chose otherwise."

After discussing additional failures of Samsung and its counsel, the court turned to the question of an appropriate remedy and found that Nokia's and Apple's requests were overbroad. "Having concluded that its protective order was repeatedly violated and at least some of these violations warrant sanctions, the court must consider what sanctions would be appropriate in this case. Apple and Nokia propose a number of creative sanctions that Quinn and Samsung should face in light of their misconduct, suggesting everything from an injunction against Samsung in the 12-630 case to a ten-year ban from representing any party adverse to Nokia. The vast majority of these are ludicrously overbroad, such as the suggestion that both Samsung and Quinn Emanuel should be banned from any situation in which they might make use of licensing information for the next two years."

The court then ordered sanctions, finding that "Quinn Emanuel shall reimburse Apple, Nokia, and their counsel for any and all costs and fees incurred in litigating this motion and the discovery associated with it, as required by Rule 37 in the absence of "substantial justification" or other showing of "harmlessness," neither of which the court finds here. That expense, in addition to the public findings of wrongdoing, is, in the court's opinion, sufficient both to remedy Apple and Nokia's harm and to discourage similar conduct in the future "

The court also imposed a new requirement for redacted documents to hopefully alleviate any of the same problems from occurring in the future. "For the remainder of the 11-1846 and 12-0630 cases, before distributing or filing redacted documents, Quinn Emanuel and any other firm representing Samsung, shall send the redacted versions to Apple's counsel for their review and approval. Apple and its counsel shall adopt a similar practice."

Apple, Inc. v. Samsung Electronics Co., LTD., et al., Case No. 5:11-cv-01846-LHK (PSG) (N.D. Cal. Jan. 29, 2014)

Written by:

Jeffer Mangels Butler & Mitchell LLP

Jeffer Mangels Butler & Mitchell LLP on:

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