Smartphone Industry Scandal: Highly Confidential – Attorney Eyes … Not Only!




‘Inadvertent disclosures’ happened (Samsung’s counsel[1]).


Inadvertent (Adj.): failing to act carefully or considerately; inattentive (Collins Online Dictionary).


A couple of days ago, F. Mueller IP expert (FOSS patent) published an interesting article about Samsung’s illegal disclosure of confidential information related to the secret Nokia-Apple patent license. In this case, the United States District Court (Northern District of California) seemed to be very ‘angry’ with Samsung and its outside counsel (Quinn Emanuel). From the start, the tone was set: ‘(…) Letting Samsung and its counsel investigate without any court supervision is unlikely to produce satisfactory results’ said Magistrate Judge Paul S. Grewal.

What are the consequences of such a disclosure and what sanctions on Samsung’s actions might be taken by the Court? Unfortunately, it’s still hard to predict...

The mere facts of this new Apple Inc. (and Nokia) vs. Samsung Electronics Co. case can be summarized as follows:

‘During the massive fact discovery in this case between August 2011 and March 2012, Apple produced copies of a number of its patent license agreements, including a June 2011 license between Apple and Nokia. Apple marked the Apple-Nokia license as “Highly Confidential --Attorney Eyes’ Only” as permitted by the court's protective order[2] [an order that will keep the information out of the competitors’ hand]. Apple also produced and marked as “Highly Confidential --Attorney Eyes’ Only” similar patent license agreements it has reached with Ericsson, Sharp, and Philips.

As fact discovery transitioned to expert discovery, on March 24, 2012, Samsung’s outside counsel sent Samsung a draft expert report by Dr. David J. Teece. Dr. Teece’s report concerned damages to be awarded for Apple’s alleged infringement of Samsung’s asserted declared-essential patents. Because it addressed highly confidential, attorneys’ eyes only information, the report should have been fully redacted of that information before it was sent. However, intentionally or inadvertently, it was not. The report as distributed included key terms of each of the four Apple license agreements.

Samsung’s outside counsel posted the report on an FTP site that was accessible by Samsung personnel. An email providing instructions to access the FTP site was addressed to the regular client distribution list used by counsel to provide Samsung personnel updates regarding this case. The information was then sent, over several different occasions, to over fifty Samsung employees, including high-ranking licensing executives. Specifically, on at least four occasions between March 24, 2012 and December 21, 2012, Samsung's outside counsel emailed a copy of some version of the report to Samsung employees, as well as various counsel representing Samsung in courts and jurisdictions outside the United States.

At this point, things get murky. According to a declaration from Nokia’s Chief Intellectual Property Officer, Paul Melin, on June 4, 2013, in a meeting between Samsung and Nokia licensing executives, Dr. Seungho Ahn informed Nokia that the terms of the Apple-Nokia license were known to him. Specifically, according to Mr. Melin, Dr. Ahn stated that Apple had produced the Apple-Nokia license in its litigation with Samsung, and that Samsung’s outside counsel had  provided his team with the terms of the Apple-Nokia license. Mr. Melin recounts that to prove to Nokia that he knew the confidential terms of the Apple-Nokia license, Dr. Ahn recited the terms of the license, and even went so far as to tell Nokia that “all information leaks.” Mr. Melin also reports that Dr. Ahn and Samsung then proceeded to use his knowledge of the terms of the Apple- Nokia license to gain an unfair advantage in their negotiations with Nokia, by asserting that the Apple-Nokia terms should dictate terms of a Samsung-Nokia license’[3] (emphasis added).

Of course, ‘Samsung’s counsel denied even one violation of the protective order, asserting that such a violation can only occur willfully’ [4].

The court is still trying to find out more about how the information was disclosed. Because the Judge had ‘reason to believe the rule has been breached in the present case’, he ordered Samsung to provide some e-mails and communications about patent license agreements to Apple; and some depositions too.

In an e-discovery world where attorneys must review an ever-increasing mass of information before turning over evidence to the other side, the risks of inadvertently disclosing privileged material are present. However, in this case, it seems that the report including key terms of each of the four Apple license agreements (that should have been fully redacted of highly confidential, attorneys’ eyes only information) wasn’t sent inadvertently. A further hearing is scheduled on October 22, 2013.

UPDATE: On October 15, Judge Lucy Koh upheld an October 2 ruling which ordered the Korean electronics company to provide details of its internal emails and communications by October 16 (more info: http://www.worldipreview.com/news/samsung-fails-to-block-court-order-over-apple-secrets-reveal?utm_source=World+IP+Review&utm_campaign=b69820f8ad-WIPR_Digital_Newsletter_17_10_2013&utm_medium=email&utm_term=0_d76dcadc01-b69820f8ad-27208341




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[2] More precisely, a protective order ‘may be issued to prevent a disclosure in a legal proceeding that would prejudice the rights of a party, or prevent the legal process from being used to harrass, embarrass, or cause someone undue burden or expense’, available at http://definitions.uslegal.com/p/protective-order/
[4] Id.

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