Tuesday, October 15, 2013

Apple, Samsung fighting on three parallel fronts in the Northern District of California: roundup

This is my second catch-up post to cover events during my week off. The previous one related to the entry into force of an ITC exclusion order Apple won against Samsung. This one is longer because there's so much going on between these two parties in the Northern District of California.

Apple and Samsung have a limited damages retrial coming up next month, a trial in a second litigation involving different patents and partly different products is scheduled to start on March 31, 2014, and there's the "Patentgate" scandal, which formally relates to both California cases (and the ITC investigation of Samsung's complaint against Apple), though it appears to be most closely related to the first case. Magistrate Judge Grewal scheduled a hearing on Patentgate for early next week. While protective order violations have nothing to do with the merits of (non-)infringement and (in)validity arguments, it's a matter of perception, and Samsung is presumably afraid of future jurors reading about drastic sanctions against Samsung and/or its lawyers.

I'm going to provide this update in three parts:

  1. Patentgate: Judge Koh apparently underwhelmed by Samsung's emergency motion

  2. Limited damages retrial: preparations on the home stretch

  3. Second California case: summary judgment motions filed

Patentgate: Judge Koh apparently underwhelmed by Samsung's emergency motion

Susan Estrich, a lawyer and Fox News commentator, is trying to defend the indefensible: the disclosure of the key terms of the 2011 Apple-Nokia patent license agreement to a multitude of Samsung executives (and Samsung lawyers in numerous jurisdictions). While everyone is innocent until proven guilty, this is an extraordinary case in which there can be no doubt about the fact that violations have occurred, and Judge Grewal made clear, during a hearing and in a written order, that this is the conclusion everyone looking at the facts must inevitably arrive at.

It's a sad story. I blog about it because this is relevant stuff, not because I enjoy it. I thought a whole lot more positively about Samsung and the law firm representing it in this case before I read Judge Grewal's order and the related hearing transcript. And I'm afraid that the longer this takes and the more comes to light, the more disappointed I'll probably be.

Mrs. Estrich argues that what her firm did was inadvertent. Comparing this to a theory under patent law, she makes a divided infringement case: on the bottom line what happened shouldn't have happened, but two parties contributed to it in different ways and neither one is really guilty with respect to its contribution. Samsung's lawyers didn't act intentionally; Samsung's executives knew what they did, but they had no idea that they had unlawfully acquired certain information. This defense is not going to work. There's a strong public interest in ensuring that relevant confidential contracts are provided to outside counsel (especially in the FRAND context) but that highly confidential business information isn't shared with clients. There are cynics who never believed this could work. But even the cynics wouldn't have necessarily thought that a breach would ever occur in such a blunt and straightforward way as it did in this case.

On October 7, the Monday following Judge Grewal's order, Samsung brought an emergency motion to stay the Patentgate proceedings and discovery (indicating that it would also file a long-shot mandamus petition with the Federal Circuit), a motion for relief from the order, and a motion to shorten time for Apple's responses. It also requested a hearing. Before I even downloaded and opened the documents, I saw, based on the headlines, that Samsung was (and presumably still is) in panic mode.

Later on Monday, Judge Koh issued a scheduling order. She gave Apple until October 9 to respond to both Samsung motions (the motion to stay and the motion for relief), while Samsung wanted Apple to respond to the motion to stay on the very same day (laughably unreasonable). She "will not entertain a reply to any of Apple’s opposition briefs". And she won't hold a hearing on any of this "because the Court finds these matters suitable for decision without oral argument". She'll "endeavor to issue a ruling promptly", and for the time being there's no stay, so the discovery ordered by Judge Grewal continues. All in all, this was a very cool reaction to Samsung's panic filings, suggesting to me that these motions will most likely be denied. In particular, there's no way that Samsung can withhold documents based on attorney-client privilege in order to conceal the wrongdoing that has already been established. It's also pretty weak that Samsung claims that the required discovery would violate an ITC protective order unless the lawyers working on this previously subscribe to an ITC protective order. As Apple notes, "Quinn Emanuel has 152 attorneys who have subscribed to the ITC protective order in the 794 Investigation [the investigation of Samsung's ITC complaint against Apple], nearly one quarter of the attorneys at Quinn Emanuel".

Samsung argues that the identified disclosure doesn't really matter because a number of Samsung executives were already aware of the terms of the Apple-Nokia agreement due to what was discussed in a Dutch court. Apple replied to this as follows:

"Samsung is referring to disclosures that were expressly requested by a Dutch court for a Dutch litigation. Those disclosures were anonymized to remove the license counter-parties' names, preventing confirmation of the terms of the agreement with any particular party. The Dutch disclosures were also limited to a group of at most 10 Samsung employees (far fewer than received the information disclosed in breach of the Protective Orders). Moreover, their use was strictly limited to that case only, similar to disclosure of confidential information under the Court's Protective Order. Thus, the Dutch materials were requested by the Dutch court, and were restricted and anonymized. As with the press accounts, the Dutch materials provided no way to definitively know the terms of the Apple-Nokia license."

"[...] Moreover, not even Samsung argues that any of the highly confidential Apple-Ericsson, Apple-Sharp, or Apple-Philips information--that was widely disseminated to Samsung employees--was ever publicly known."

Samsung and its lawyers are in trouble.

While Apple filed a rather short and focused reply to Samsung's motions (not even half as many pages as the court's rules would have allowed), it did devote a paragraph to Samsung's history of breaches of court orders in this very case:

"This is far from the first time that Samsung has contravened this Court's orders in this case. Samsung has been sanctioned repeatedly, including for (1) failing to comply with discovery orders requiring production of design and copying documents, Dkt. No. 880, at 9 ('Samsung's belated production of these documents directly contradicts counsel's multiple representations to this court that the type of documents Apple sought did not exist. Even more troubling is Samsung's failure to address the inaccuracy of these earlier representations to the court.'); (2) withholding source code, Dkt. No. 898, at 5-6 (finding that Samsung 'plainly violated the court's December 31 deadline' requiring Samsung to produce source code, and did not product some source code until 'after the close of fact discovery—knowing full well that the court would not grant the parties any exceptions'), at 8-9 ('Samsung offer[ed] precisely zero evidence to show that its actions were in good faith, or otherwise justified'); (3) withholding financial information, Dkt. No. 880, at 10 (ordering evidentiary sanctions after Samsung failed to comply with a Court-ordered deadline to produce financial documents, despite having 'unequivocally stated' to the Court that it had ''agreed to produce all of the financial information' that Apple requested' by the deadline); (4) delaying disclosure of liability theories, Dkt. Nos. 1144 (striking portions of Samsung’s expert reports that included 'theories never previously disclosed to Apple during discovery') and 1545 (affirming sanction). And at trial, after Samsung's counsel authorized the release to the media of demonstratives that this Court had excluded, the Court recognized the 'real and possible danger that Samsung and Quinn, Emanuel made the decision to take the risk of tainting the jury.' (Trial Tr. 575.) The Court further found that Mr. Quinn 'left this courtroom and deliberately and willfully, with Samsung, issued a press release to highlight evidence that they both knew was excluded and was inadmissible in this trial,' in a 'willful and deliberate attempt to further propagate that excluded evidence the day after a jury had been impaneled.'(Id.)"

All of this -- including a list of Samsung "dirty tricks" published by Fortune/CNN -- hurts Samsung's reputation even before the court has determined sanctions.

Nokia also opposes Samsung's motions. While Nokia and Samsung have stipulated to certain procedures (which Apple considers to be no substitute for court-supervised discovery), Nokia still wants the facts to come to light and the court to draw the appropriate conclusions. It intends to hold Samsung to the stipulated procedures as well as its discovery obligations under the discovery order requested by Apple. In its brief, Nokia quotes (and described as "cogently reasoned") the introductory paragraphs of Judge Grewal's order:

Time and again in competitor patent cases, parties resist producing confidential information to their adversaries' lawyers. They fear, among other things, that the lawyers will insufficiently shield the information from the competitors that they represent. Yet time and again, the court assuages these fears with assurances that a protective order will keep the information out of the competitors' hands.

A casual observer might reasonably wonder what magic a protective order works that allows outside counsel access to confidential information to advance the case without countenancing untoward uses by the client.

The answer is not a magical one at all: confidential information remains confidential because counsel and clients alike follow court orders. If parties breach this basic rule, the court's assurances become meaningless.

There is reason to believe the rule has been breached in the present case.

Limited damages retrial: preparations on the home stretch

Unless the U.S. government shutdown lasts much longer (it actually looks like a resolution is near), the limited damages retrial in the first Apple v. Samsung case will begin on November 12, 2013. Samsung is still apparently hoping that the ongoing reexamination of the '915 pinch-to-zoom API patent may dissuade Judge Koh from going forward with the retrial and has recently filed a letter relating to a request by Apple for an interview with the examiner, but I doubt that this would derail the retrial.

Judge Koh wants the retrial to be "Groundhog Day", and Samsung doesn't want to have to defend itself once again against Apple's allegations of copying. The court wanted Apple to clarify beforehand inhow far it would refer to "copying". In filings made yesterday, Apple said that its damages expert, Julie Davis, "will not use the word 'copying' to describe Samsung's actions or intentions", but also pointed out that any evidence relevance to the question of "whether it is more probable than not that, in the absence of infringing Samsung products, consumers would have purchased more iPhones and iPads" is relevant, and the new jury "should be permitted to hear and consider the totality of such evidence".

The following sentence states Apple's position on legitimate competition vs. illegal copying:

"Apple thinks competition is great, when each competitor comes up with its own unique ideas and the customer decides what they like better. Copying is not fair competition, because when one company copies the ideas of another company, they are trading off all the good will and investment that the second company built on its own ideas, and taking all that investment for itself. Samsung's actions have had a large impact on the smartphone market, by diminishing the value of Apple’s ideas, particularly its unique designs, and negatively impacting Apple's sales, both by initial purchasers and because purchasers enter the Samsung ecosystem rather than Apple's."

The parties also filed their proposed jury instructions and verdict forms. On the format of the verdict form they were further apart last year. Apple still proposes a product-specific verdict (without any further disaggregation). Samsung still wants more granularity, but just with respect to the types of damages, not a product/patent damages matrix, which it advocated last time. A product/patent matrix would allow identifiable parts of the damages verdict to stand even if other parts had to be eliminated as a result of a change of liability findings on appeal. In the scenario of patent later being found invalid or not to have been infringed, the upheld parts of the damages verdict would have to be redetermined anyway, and a third trial in this case would have to be held anyway.

The parties also submitted jury questionnaires. Obviously a key question is going to be what potential jurors know about the first trial. The parties also largely disagree on what the court should tell the second jury about the first trial.

Second California case: summary judgment motions filed

While Patentgate and the damages retrial (and post-retrial motions) will be in the news for some more time, the strategically most important Apple-Samsung court event in the near to mid term is actually going to be the trial in their second California litigation, scheduled to start on March 31, 2014.

Last month the parties narrowed their case to five patents each. Before the final narrowing (to five claims) occurs, the court will adjudicate their summary judgment motions, which were filed on Thursday.

In the first California case, summary judgment worked out more favorable to Apple, which brought a very focused motion and was cleared of infringement of one Samsung patent, than for Samsung, which carpet-bombed the case with 12 (!) summary judgment requests and lost all of these bids. But this time around, Samsung's summary judgment motion is narrower than Apple's, but Apple has the benefit of the court previously having considered (in a preliminary injunction ruling) the infringement and validity of four of its patents-in-suit likely. Samsung wants to be cleared of infringement of the '647 "data tapping" patent in the "Jelly Bean" version of Android (apparently Samsung and Google believe that "Jelly Bean" and subsequent Android versions incorporate a workaround), wants a couple of Apple patents (on data synchronization and Siri-style unified search) invalidated, and wants the court to find that one of its asserted patent claims "has a priority date of November 9, 2004" (in an effort to render certain prior art contentions ineligible). Apple wants the court to determine that Samsung infringes one claim each of its autocomplete, data tapping and data synchronization patents; that certain prior art references don't render two claims of a unified search patent invalid; and that a Samsung patent on multimedia synchronization is invalid.

I will probably discuss these summary judgment motions in more detail after the opposition briefs have been filed.

The parties have also begun to attack each other's expert testimony. I haven't yet looked at those motions in detail but may do so later.

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