Tuesday, October 22, 2013

Patentgate: Apple urges court to impose "severe sanctions" on Samsung, which contradicts Nokia

Today at 1:30 PM Pacific Time the United States District Court for the Northern District of California will hold an Apple v. Samsung sanctions hearing relating to the "Patentgate" scandal involving improper disclosures of highly confidential terms of Apple's license agreements with Nokia, Ericsson, Sharp, and Philips. There's going to be a huge fight over whether Samsung and its lawyers should be sanctioned, but also over whether Samsung should additionally be sanctioned for contempt of a related discovery order.

Dozens of Patentgate-related documents were filed yesterday by Apple, Nokia and Samsung. While I usually try to comment rather quickly on new filings, I took my time to understand the parties' positions:

  • The details of Nokia's positions are unclear due to far-reaching redactions. It's closer to Apple than Samsung on this one, but apparently not 100% aligned in the discovery context.

  • Samsung denies wrongdoing of the punishable kind. It says that whatever its lawyers did was inadvertent, and things like this just happen when you have a huge dispute involving truckloads of documents. In particularly, it has produced various sworn statements according to which different Samsung employees don't remember having seen the terms of the Apple-Nokia license agreement -- and one declaration that contradicts statements made by Nokia (will go into more detail on that one further below). Samsung calls the whole Patentgate matter a "satellite litigation" and the related discovery a "fishing expedition" by Apple and Nokia that should be brought to an end now. Samsung says it has "moved mountains in its effort to comply with the Court's Orders".

  • Apple wants more discovery, which it says Samsung obstructs by claiming privilege where the "crime-fraud exception" applies (which is going to be the key legal issue at today's hearing, given that Samsung disagrees completely), and argues that what has been produced anyway leads to the "inescapable conclusion" that Apple is right. Still, Apple wants more light to be shed on what happened, including that Samsung's external lawyers in multiple countries should also have to provide sworn declarations on their receipt and use of the relevant information.

    According to Apple, the court "should order the additional requested discovery--and ultimately, order severe sanctions--to convey to Apple and the many others watching this proceeding with heightened interest that they can trust protective orders to secure even their most sensitive information when produced in discovery". Not only should there be sanctions for the disclosures themselves but "Samsung and its lawyers should [also] be held in contempt for their knowing failure to comply with the Court's October 2, 2013 Order".

All of the above sets the stage for a really hard fight today.

I also found some other interesting tidbits in the filings. For example, Justice Bennett of the Federal Court of Australia also referred to these disclosure issues in an order dated October 11, 2013, and on Thursday may look again at the "issue of the breach of the external counsel only confidentiality regime in the Australian proceeding". Another filing refers, in the publicly-accessible part, to a "filing" of whatever kind (but apparently related or at least relevant to Patentgate) in Italy. And last week I published the headlines of certain documents filed with the ITC in this regard.

At the now-famous Nokia-Samsung licensing negotiation meeting in June, Samsung apparently made Nokia an offer (the terms of which are unknown), which Nokia rejected (otherwise we'd have heard of a deal between them by now), but which it considered for about an hour (it requested a break for this purpose).

The part that could really get nasty is that there appears to be a huge discrepancy between Nokia and Samsung's accounts of what Samsung's chief licensing executive, Dr. Ahn, said at the June meeting about his knowledge of the Apple-Nokia license deal terms. The original declaration by Nokia's Paul Melin is unavailable, so I can't compare directly the declarations of the two key participants in the meeting. There could be a situation now in which only one of two sworn declarations can be accurate, and in that event I'm obviously not going to take a position on who tells the truth (or more of the truth) because only the participants in the meeting know what was and what wasn't said. All I can do is report on what publicly-accessible documents say.

Here's how Judge Grewal described what Nokia's Paul Melin stated in his declaration:

"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."

But Judge Grewal also said "[i]t is possible that Dr. Ahn's encounter with Mr. Melin occurred very differently", and therefore ordered Samsung to provide sworn testimony from Dr. Ahn. That declaration explains that he doesn't really remember receiving or reviewing any of the documents containing the related disclosures (which is also what other Samsung witnesses say -- they don't deny that it happened, but they do deny that they remember it). Instead, he says his estimates of the deal terms "came from multiple media reports and discussions with non-Samsung lawyers and representatives of other companies who have negotiated with Samsung". And now comes the part where Samsung's representation of the discussion of the Apple-Nokia deal at the Samsung-Nokia meeting appears irreconcilable with Nokia's testimony as summarized by Judge Grewal:

"22. I am certain that I did not tell Mr. Melin at the June 4, 2013 meeting that I received Apple/Nokia licensing terms from my outside counsel in the Apple/Samsung case, because it is not true, and because it would be a very foolish thing to say. I hold a J.D. from an American law school, Santa Clara University, and until I moved to Korea approximately ten years ago I was a member of the California Bar. I am well aware of the importance of protective orders in United States litigation. I have been responsible directly or indirectly for the supervision of hundreds of patent litigations. In most, if not all of them, a protective order is entered. These invariably cover license terms which I know from experience are highly confidential and sensitive information. The confidentiality of this type of license information is as important to Samsung as it is to any other technology company. It would be incredibly reckless for me to have made such a comment to Nokia. It would amount to my admitting to an adversary that our outside counsel and Samsung had violated a protective order protecting the adversary’s information and that I was attempting to use the information gained by such a violation to negotiate license terms. The idea that I would violate a protective order is simply wrong, and the idea that I would tell my adversary that I and my outside counsel had violated it and furthermore were violating it in that very instance by trying to profit from its use is preposterous. [REDACTED]

23. I may have used the word 'leak' at the June 4th, 2013 meeting with Nokia, or some other word to reference the idea that all information gets out, though I don't recall the precise phrase I used. I do believe that there may have been some sort of leak due to the contemporaneous media reports outlining the terms of the Apple-Nokia license. But I cannot be certain of this. It has in fact been my own experience that information gets out. I know this from my own experience and I recounted to Mr. Melin a situation a few years ago where Samsung had entered into a confidential settlement with another company and very shortly thereafter everyone in the industry seemed to know it."

On this basis, Samsung's lawyers claim that "[t]he full record now confirms that Nokia's allegations concerning Dr. Ahn are not only implausible but factually false". Again, I'm not going to speculate on who's more or less likely to tell the truth here. It's just hard to imagine how they could both be right at the same time...

I'll try to obtain a transcript after today's hearing and I look forward to different media reports.

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