At 1 AM local time, Magistrate Judge Paul S. Grewal just entered an order that considerably ups the ante for Samsung's persuasive efforts at the trial starting next Monday. The jury will receive an adverse inference instruction with respect to Samsung's spoliation of evidence by failing to retain relevant messages on its corporate email server even at a time when litigation was "reasonably foreseeable". In essence, the jury will be told that Samsung failed to comply with its obligations to preserve evidence, and the jury may (though it need not) presume that relevant evidence that would have been favorable to Apple was destroyed. This must be a nightmare for a trial lawyer who tries to enhance his client's (and demolish his adversary's) credibility.
Thankfully, Judge Grewal did not seal any part of his order. In a footnote he stated his commitment to transparency. In that spirit, here's his order, which I'll discuss further below:12-07-25 Apple v Samsung Adverse Inference Jury Instruction Order
This is the instruction the jury will receive from Judge Koh as a result of the order (unless Samsung wins relief from Judge Grewal's order, which Judge Koh probably won't grant under the circumstances):
"Samsung has failed to prevent the destruction of relevant evidence for Apple's use in this litigation. This is known as the 'spoliation of evidence.'
I instruct you, as a matter of law, that Samsung failed to preserve evidence after its duty to preserve arose. This failure resulted from its failure to perform its discovery obligations.
You also may presume that Apple has met its burden of proving the following two elements by a preponderance of the evidence: first, that relevant evidence was destroyed after the duty to preserve arose. Evidence is relevant if it would have clarified a fact at issue in the trial and otherwise would naturally have been introduced into evidence; and second, the lost evidence was favorable to Apple.
Whether this finding is important to you in reaching a verdict in this case is for you to decide. You may choose to find it determinative, somewhat determinative, or not at all determinative in reaching your verdict."
For an adverse inference jury instruction, this is relatively soft. The court could also have told the jury that it "must" presume that relevant evidence in Apple's favor was lost, or in a worst-case scenario for Samsung, that certain of Apple's claims must be deemed proven. But the fact that the outcome could have been worse, or even much worse, for Samsung doesn't mean that the above isn't pretty useful to Apple. In connection with any claim made by Apple, Samsung will either need to have some credible rebuttal evidence available or otherwise some or all jurors might assume that Apple could have proven its claim if not for Samsung's established "spoliation of evidence".
It also doesn't make Samsung look good, generally speaking.
One context in which this evidentiary issue is particularly relevant is the question of whether Samsung willfully infringed on Apple's intellectual property -- the "copycat" story. Infringement and validity are technical issues that shouldn't depend on whatever emails were automatically deleted on Samsung's corporate email system (though a given party's credibility can also influence whether jurors are inclined to believe that there is an infringement of valid rights). It's the whole willfulness context in which internal communications play a key role.
Here's a passage from the order that provides an example:
"Joon-Il Choi, a senior manager in Samsung's R&D Management Group, did not produce any emails. Mr. Choi, however, presided over and wrote notes for a meeting that Gee-Sung Choi, Samsung's former President and CEO of its digital media division and current Vice Chairman of Corporate Strategy, attended on March 5, 2011, to discuss alterations to the Galaxy Tab 10.1 to make it more competitive with the newly released thinner iPad 2."
Samsung's own trial brief argues that it's perfectly normal for competitors to conduct "benchmarking" of their products against those of their rivals in order to identify areas in which they need to improve. Samsung says Apple is no exception. While that makes sense, it won't necessarily persuade your average juror as much as it would an industry expert. Someone who is unconvinced of the "benchmarking" theory would probably want to see the emails that were exchanged internally. But the judge will tell the jury that some of this evidence was destroyed.
In a quantitative sense, this case doesn't suffer from a shortage of evidentiary material. Approximately 38.4 million pages (!) form the evidentiary record in this case. But some of the potentially most enlightening material got lost because Samsung, in the court's opinion, failed to do what it had to do.
This trial is going to be a tough fight. We're not going to see two business partners handling each other with kid gloves (though they still do a lot of business on the component side). Whether Wall Street is right or not to be somewhat disappointed with the numbers Apple announced yesterday, there can be no doubt that Apple would have sold more iPhones last quarter, despite all of the anticipation of the iPhone 5, if Samsung had not sold that many Galaxy phones. And in the current quarter, the wildly popular S III is going to give Apple a hard time. Also, Samsung continues to run advertisements that make fun of Apple in ways that won't always seem funny to the decision-makers in Cupertino.
Losing is not an option for Apple in this dispute. And in this overall situation, an adverse inference jury instruction makes things even harder for Samsung.
In my opinion, Judge Grewal's order gives Samsung the benefit of the doubt in some respects in which other judges might have seen evidence of recklessness and ordered even tougher sanctions. The order starts with an explanation of how Samsung already had a problem with discovery rules governing U.S. lawsuits when it defended itself against a patent assertion entity named Mosaid seven years ago. At that time, Samsung was already told that the automatic deletion of emails on its corporate server after two weeks, which Samsung argues is necessary because of Korean privacy rules, is inconsistent with retention obligations under U.S. law. Samsung employees are free to use Microsoft Outlook, and it appears that Outlook is the email client Samsung's employees based outside of Korea use primarily. But Samsung's most senior leaders are based in Korea and use "mySingle", which was developed internally by some entity within the Samsung group. Even with that one, employees could always make local copies of emails, and Samsung did make many employees aware of the possibility of litigation with Apple, but it didn't really follow through to ensure that emails were retained. As a result, those Samsung employees who use Outlook made far larger number of emails available to discovery than those using mySingle.
Samsung apparently complied with all those rules after litigation started. But the legal standard is that litigation must be "reasonably foreseeble". An August 2010 meeting in Korea, attended by Steve Jobs and Tim Cook on Apple's side, was all about Samsung's alleged "infringement" of Apple's rights, but "Samsung euphemistically refers to Apple's infringement presentation as a 'licensing discussion.'" And when Samsung made many employees aware of a potential dispute with Apple, it also noted that litigation would only happen "unless a business resolution can be reached", a possibility that always exists in theory and can't serve as an excuse for non-compliance.
Apple has already won some other useful pre-trial decisions. While Samsung also won monetary sanctions against Apple in a couple of instances, those won't affect the parties' chances at the upcoming trial. But an adverse inference jury instruction can tilt the scales in Apple's favor in such contexts as willfulness. Should Samsung be found to have infringed willfully, some components of Apple's $2.525 billion damages claim could be tripled. A finding of willfulness would also increase the likelihood of injunctive relief.
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