The stakes could hardly be higher than the multi-billion dollar design patent trial between high tech titans Apple and Samsung – both are among the top 30 largest global companies. Apple’s iPhone invented the smart phone category and this suit alleges that Samsung copied the iPhone’s design in violation of its patents.

With hundreds of millions of dollars hanging in the balance, less than a week before trial U.S. Magistrate Judge Paul S. Grewal ordered in Apple, Inc. v. Samsung Elecs. Co. Ltd., No. C 11-1846 LHK (PSG) (N.D. Cal. July 25, 2012) adverse inference instructions due to spoliation resulting from Samsung’s poor efforts to manage its litigation hold. Even so, Samsung probably got off lightly.

While Apple officially filed its complaint against Samsung on April 15, 2011, the Cupertino-based company had notified Samsung of its infringement on August 4, 2010 – fully seven months earlier. In spite of disputing that the duty to preserve attached then, Samsung issued a legal hold to a small group of key employees on August 23, 2010, in which it admitted the potential of litigation.

While issuing a written legal hold was good, Samsung’s efforts were woefully inadequate. The custodians who were notified at that time were a small group and nowhere near the number of employees with potentially responsive information. Samsung Electronics did nothing to suspend the automatic deletion of emails every two weeks on the system that managed email at its headquarters in South Korea. (Unfortunately, it was pointed out that this issue had already resulted in spoliation in Mosaid v. Samsung 348 F. Supp. 2d 332, 333, 339, D.N.J. 2004 – and nothing was done about it.) Finally, Samsung did nothing to verify whether employees were complying with the litigation hold instructions for the next seven months. (*11)

In April 2011 once Apple filed the complaint, Samsung seemingly gets serious. Within a week, Samsung issues a strongly worded hold to 2,300 employees which it further amended and expanded to 2,700 employees. (*13) The problem is that it still did not suspend automatic purging of the email system. In assessing the extent of the spoliation, Apple pointed out that 14 key fact witnesses produced little to no email for that time, when similarly situated counterparts produced thousands. (*21)

Apple’s argument prevailed that even though bad faith wasn’t established, Judge Grewal noted that, “bad faith is not required mental state for the relief Apple seeks. Samsung acted with ‘conscious disregard’ because with the auto-deletion protocol it had an obligation to verify compliance. (*18) The court added, “This is more than sufficient to show willfulness.” (*19)

Judge Grewal was unambiguous in his decision that Apple had suffered prejudice from the spoliation, writing that, “In effect, Samsung kept the shredder on long after it should have known about this litigation, and simply trusted its custodial employees to save relevant evidence from it.” (*24) The court relied on Pension Committee’s methodology for determining how to word the adverse inference instruction. Following are the instructions in their entirety that will be read to the jury:

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. (*24)

While no one would want to hear that instruction read aloud in a courtroom, it is arguable that the given the past warnings about such behavior and the extent of the loss of potentially incriminating emails that the court had leeway to do more.

The key takeaways in Apple v. Samsung are as follows:

  • A litigation hold does not end with the issuance of a written notification – that is only the beginning. Ongoing monitoring and compliance that custodians are complying is critical, otherwise the court will view one’s efforts as an empty gesture as Judge Grewal did here with Samsung.
  • If your organization has any systems that automatically purge data, then know where they are and how to suspend those efforts immediately otherwise it could result in being tagged with “conscious disregard” in the eyes of the court.

Even before the merits of the case are weighed by the jury, Samsung is already on its back foot because of the implications from the bench.

8/20 UPDATE — As Apple v. Samsung was going to the jury for deliberation on Sunday, August 19, Judge Lucy Koh included an adverse inference instruction as per Judge Grewal’s court order of July 25. However, in a surprising move the court also added a similar adverse inference for spoliation targeting Apple which effectively neutralized the original instruction. Read Florian Mueller’s coverage of this development on the FOSS Patents blog in the post Samsung successfully neutralizes adverse inference jury instruction concerning deleted emails.

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