Friday, October 4, 2013

Apple lawyer on Samsung scandal: "I'm old enough not to believe in coincidences anymore"

Before I talk about the primary subject of this post, let me just say up front that I'm going to take a week off now (explanation provided further below), so unless something absolutely amazingly spectacular happens (such as an Apple-Samsung settlement), this blog won't be updated until at least the 14th.

Yesterday's post on a court order regarding further discovery that will presumably result in sanctions against Samsung and its outside counsel -- involving highly confidential information about patent license agreements Apple struck with Nokia, Ericsson, Sharp, and Philips -- has sent shockwaves. Not only has it received tens of thousands of hits on this blog but the copy of the document that I uploaded to Scribd was viewed more than 1.2 million times during the first 24 hours or so (not on Scribd itself but as an embedded document on various major news sites). I can't remember that any other document I uploaded was viewed by so many people on a single day.

The next hearing on this deeply troubling issue has been scheduled for October 22, and the courtroom may be crowded. It's not about smartphone patent infringement anymore. It's turned into a smartphone industry scandal. This is Patentgate.

Given how much interest there is in this, and with a view to the October 22 hearing, I wanted to publish the hearing transcript, which I obtained today. The hearing was public proceeding, and the transcript, while not available for straightforward download, is public, too. It spans 76 pages. Here it is (this post continues below the document):

13 10 01 Apple Samsung Nokia Hearing Transcript by Florian Mueller

I read it in its entirety to identify the highlights. Large parts of it are really boring and deal with the auditing process Samsung's lawyers organized and which Apple doesn't consider satisfactory, which is why it asked the court for help, and Magistrate Judge Paul S. Grewal ultimately concluded that the fox can't be in charge of an investigation of the disappearance of chickens at the henhouse.

If you choose to read it anyway, you'll find some interesting stuff beyond the few tidbits I'm going to quote or summarize now. You may want to count how many times Judge Grewal suggested to Samsung's counsel to concede a violation (for example, on pages 30 and 31 of the transcript), and how she tried to hide behind everything and everyone only to avoid this concession. All she would concede is that "inadvertent disclosures" happened, and she argues that maybe there's a violation, but if there is one, it's not one that warrants sanctions because it wasn't willful.

Judge Grewal thought that Samsung would at least concede a violation based on that negotiation with Nokia in June at which a Samsung licensing executive allegedly boasted with his knowledge of the Apple-Nokia deal. Samsung admitted nothing, and neither confirmed nor disputed the veracity (the transcript consistently says "voracity") of a declaration by a Nokia executive on what was said at the meeting. That's one of the topics on which the court has ordered some discovery.

On page 22 of the document, Apple's lead counsel in this matter, WilmerHale's Bill Lee, says what I quoted in the headline above because it addresses all those theories of "inadvertent disclosure" pretty well:


So are the judges, but given the magnitude of the issue they want to err on the side of caution.

What's astonishing is that a lot of what's at issue here occurred months after the first California trial between these parties and when there really wasn't any reason specific to the first California case to use the relevant material. But there were reasons in other contexts. In particular, Apple says that Samsung made use of it before the ITC, and it then delayed Apple's access to information on the occurred violations so that Apple wasn't able to leverage this in its efforts to avoid an ITC import ban. Fortunately for Apple, the import ban was vetoed anyway.

It's not easy at this stage to find out the full extent of the dissemination of the Apple-Nokia deal and other confidential information involving Philips, Sharp, and Ericsson (particularly Ericsson, a company with which Samsung is embroiled in litigation, as Apple's counsel also mentioned at the hearing). There are apparently no access logs for the FTP server set up by Samsung's lawyers for the sharing of information relating to this earth-spanning dispute. There were people in ten countries who could have accessed the information. On page 55 you can see that Judge Grewal understood the technical problem that searching for a document based on a hashtag "would not identify merely looking at the FTP site as opposed to downloading and saving a copy", which Samsung's counsel had to confirm.

Apple's counsel said the disclosure of contract terms through the insufficiently-redacted Teece report became "viral". On page 71, he says that "the very information that [this] Court has held as confidential and for those compelling reasons did not let the public see it during the trial has now been disseminated all over the world". Apparently, it was even used in a litigation Samsung has with a troll (mentioned on page 45 of the transcript).

One thing rendered me speechless. According to Apple's counsel, Samsung proposed to delete all of the e-mails that contain Apple's confidential information, "but fortunately Nokia said no, you can't do that, you can't do it".

Nokia also wanted to participate in further discovery, but unlike Apple, it's not pursuing sanctions against Samsung and it has entered into a stipulation with Samsung that wouldn't be acceptable to Apple. I guess Nokia just wants to (a) protect its confidential information and (b) maintain a reasonably constructive relationship with Samsung, a company to which it will want to sell a non-standard-essential patents license, ideally without litigation. But Samsung can't solve the whole problem by just making peace with Nokia. Apple wants to find out about the magnitude of the violation and then it will seek relief. And the court doesn't appear to be impressed at all with Samsung's representations, sort-of-denials, and arguments.

The transcript confirms that there's "an analogous issue involving different information, overlapping but different information, at the ITC". I mentioned in my previous post on this matter that I saw headlines on an ITC docket. So there could be sanctions in federal court, sanctions by the ITC, possibly sanctions in non-U.S. courts in which material was used against the rules. This is a mess. It's not fun to read it or to write about it. But it's important and I can only hope that what has happened and is happening in this case will result in greater compliance with protective orders going forward.

First week off in three years

On October 1, 2013 I saw Microsoft's first patent infringement action over Android against Motorola, and that was about six weeks after Oracle sued Google (the first smartphone IP case I blogged about) and seven months after Apple sued HTC (which was shortly before I started this blog). I have since then been following the smartphone patent disputes -- focusing after a year almost exclusively on cases involving large players on both sides -- in detail, and I'm not done with this yet. My business is consulting, not blogging, but the blog obviously has synergy effects with my consulting work. I try to keep it up to date, and I like to be the first, or at least among the first ones, to comment on major new developments. That's why I haven't had a week off in three years.

Now, with the U.S. government shutdown and due to other circumstances, and with no German court hearing on my calendar for next week, I thought it was a good time to focus on some other things and to relax, knowing that busy times are ahead.

So this is not a shutdown over privacy concerns (just alluding to some other blog) or anything like it. And it's probably going to be an exception. Obviously, nothing lasts forever and there will be a point at which I'll stop blogging about patent disputes and the related issues. For example, I could picture myself as an app developer. But I'm not there yet, so I'll be back on or shortly after the 14th, and I'll do a roundup then of whatever happens in the meantime in connection with the issues I blog about.

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