Ahead of the "Patentgate" hearing on Tuesday (on improper disclosures of secret Apple license agreements with Nokia, Ericsson, Sharp, and Philips) I had summarized the parties' positions. Media reports from the hearing were consistent with what I expected everyone to argue based on pre-hearing filings.
After the hearing Magistrate Judge Paul S. Grewal entered an order of an in camera (in chambers) review of select documents containing information Samsung refused to provide to Apple and Nokia on grounds of privilege. Should Judge Grewal find that Samsung tried to hide something and asserted privilege groundlessly, then things will take more time. Otherwise I guess an order on Apple's motion for sanctions will issue shortly because Judge Grewal is interested in resolving this matter (though the party that ends up unhappy with the result may and probably will appeal) ahead of next month's limited damages retrial in the same district (Northern District of California).
Late on Thursday Samsung brought a motion asking for slightly more time to provide the related material to Judge Grewal. According to its motion, "Samsung will have a portion of the 11,500 pages of English language documents delivered to the Court before noon [today], and an additional set delivered before 5:00 p.m." and "will attempt to meet all remaining deadlines in the Order as well". Just as I was writing this post, Judge Grewal ruled on that motion. He granted it in part, adding another requirement to Samsung's proposal: "All remaining English documents shall be produced by October 28, 2013 at 9am."
No matter how many pages will be delivered now, it appears to me that the "Patentgate" affair has already had an irreparable effect: the industry at large no longer trusts that its contracts will be treated in abidance by protective orders. I see profound concern in some places, and unless these proceedings result in sanctions that are viewed as a serious deterrent, industry players will assume that the rules will continue to be breached because there's more to gain than to lose.
At this stage (though it may be too early to tell because who knows what the in camera review will uncover), it's not likely that the court will order sanctions of the deterrent kind. At the conclusion of the Tuesday hearing, Judge Grewal said he was not yet sure that sanctions are warranted. This suggests to me that if he orders any sanctions at all, they will be light.
The challenge for the court here is that a Samsung executive and a Nokia executive have described, in sworn declarations, certain statements by that Samsung executive on how he learned about the Apple-Nokia deal terms and whether he told Nokia the exact terms of the license in ways that I found impossible to reconcile. Judge Grewal said "there are two people to this conversation and they have presented diametrically opposed accounts of what happened". And as a result he now has to "make a credibility determination based on a cold record".
The court can make that determination -- but if it has to rule on sanctions based on such a determination as opposed to undisputed facts, then the sanctions will probably be light.
I'm not going to take a position on which of these executives is more credible. I did not participate in the conversation. I only wish to mention two things that could affect the court's related analysis:
Samsung's lead counsel in the Tuesday hearing, Quinn Emanuel founder John Quinn (who said twice that they "deeply regret" what has happened), attributed the diametrically opposed accounts to the fact that the participants in that licensing discussion weren't native English speakers. He recognized that Scandinavians are usually pretty good at it anyway. As for Samsung's Dr. Ahn, his declaration says in one sentence that he holds "a Ph.D in Materials Engineering from the University of Illinois, Urbana-Champaign" and "a J.D. from Santa Clara University", but then he stresses that English is not his first language. So he's a doctor in engineering, and a doctor in law, and obtained those degrees at U.S. universities. Furthermore, his declaration mentions that "until [he] moved to Korea approximately ten years ago [he] was a member of the California Bar". How can he do any of that -- let alone all of that -- without being fluent in English at least with respect to the topic of the conversation with Nokia?
Another credibility issue Samsung faces here is that it refused for months to provide a declaration by Dr. Ahn at all. If a declaration by him could easily clarify everything, why didn't they do this voluntarily?
Again, this does not mean that I doubt Samsung's declaration(s), but these factors could play a role in the court's analysis, the outcome of which will also depend on whether the in camera review leads to the determination that more discovery is needed before a decision.
I'm now going to share the transcript with you, and below that document I'll talk about some implications this has.
As for the wider industry concern, it's worth noting that HTC immediately made a filing stressing the need for confidential treatment of its settlement agreement with Apple when it saw that Samsung wanted to use it at next month's limited damages retrial. HTC might have done so in any event. But there's definitely more sensitivity to the issue now.
With respect to the Apple-Nokia deal, the genie is out of the bottle and can't be put back. To the extent that Samsung executives submitted sworn declarations, they denied having looked at the information provided to them on the terms of the deal, but there were literally hundreds of recipients. There is considerable risk of this information being used against Apple and against Nokia, not only in negotiations but also in judicial proceedings (I mentioned in my pre-hearing post that an Australian judge wanted to know more about the potential impact on certain litigation down under).
What has happened also has ramifications for antitrust enforcement: the Eurpoean Commission is currently market-testing a set of proposed Samsung commitments that I deem totally insufficient as a model for how the industry should resolve FRAND disputes and particularly unhelpful in connection with Samsung, a party to which the terms of several major license deals were secretly disclosed. Under Samsung's proposal to the EU, which the Commission should have rejected outright instead of conducting a market test (though I doubt it will pass the test), terms would be discussed in secret arbitration unless Samsung consents to an alternative mechanism (instead of making court determinations the standard solution). Samsung could then leverage the information it obtained and get away with it. Not only would it get away with it but it would probably get more favorable deal terms than if there were a level playing field with no one knowing the other party's deal terms.
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