Samsung and its US lawyers could face sanctions after a secret patent licence between Apple and Nokia was distributed to scores of Samsung staff, breaking a court order.
Judge Paul Grewal has ordered one of Samsung's patent licensing team, as well as five other Samsung staff who have been identified by Apple in a court filing, to appear in front of him by 16 October. A further heading is scheduled for 22 October.
More than 90 Samsung staff could have seen the document, marked "Highly Confidential Attorney Eyes Only", in breach of a court confidentiality order.
Grewal's order follows complaints by Apple and Nokia that staff from the South Korean manufacturer learnt details of their secret June 2011 patent licensing deal from a document that was meant to be restricted solely to an expert witness, David Teece, who was writing an opinion on Samsung's behalf for last year's patent court battle with Apple.
Samsung, or its lawyers, may be liable for a fine under California's laws for breaking the court's order on the protection of the confidential information - though it's unclear whether that is the only option open to Grewal if he should find against Samsung or its law company, Quinn Emanuel.
Samsung's lawyer admitted in a court hearing before the order that a junior member of the law firm had failed to redact terms of the licence deal correctly, leaving them visible to Samsung executives who should not have been able to see them. But he argued that this was not a violation of the court order which is meant to keep such details secret, because it was not intentional.
It is not the first time that Samsung staff have been accused of making use of confidential information about Apple's business plans. In September 2011, Suk-Joo Hwang, a former manager at the company, testified that in December 2009 he had passed confidential shipping data about components for the Apple iPad - then not even announced - to members of a US hedge fund. Hwang received immunity from prosecution in return for his testimony.
Obstruction over disclosure
In the current case, Apple complained that Samsung had obstructed its attempts to find out how many people had seen the licences without permission, and failed to say whether it was using the wrongly-acquired material in other court proceedings - including one ongoing in the US.
Samsung had failed to give Apple any information about who had seen the licensing terms in the three months since Nokia had raised the topic, Apple's counsel said. And Samsung's lawyers had actually been aware of the breach of the court order since December 2012, Apple's lawyer claimed.
According to a declaration from Nokia's chief intellectual property officer Paul Melin of a meeting with Samsung licensing executives on 4 June, Seungho Ahn told Nokia that he already knew the details of the licence - and stated that Apple had produced the licence as part of its litigation with Samsung, and that Samsung's lawyers had provided him with a copy. "All information leaks," Ahn was quoted as saying, in Melin's declaration.
The Apple-Nokia deal is highly secret, and was struck by the two companies to cover a number of essential and non-essential patents in June 2011, after years of litigation following the launch of the original iPhone in 2007.
Apple made a one-off payment and agreed to make a number of ongoing royalty payments, and licensed some of its own patents to Nokia. The terms of the licence were never released - and like all patent licence deals, were treated as highly secret.
If the details of the deal were made public, or revealed to a competitor, it would mean that they would know how the two sides valued their patents - and so weaken them in future negotiations because it removes their ability to negotiate on price or value against someone whose prices and values are unknown.
'Fox investigating the henhouse'
Grewal's order contains harsh, if veiled, criticism of Samsung. "It is possible that Dr Ahn's encounter with Mr Melin occurred very differently. Unfortunately, the court cannot say, because Samsung has elected not to provide the court with any sworn testimony from Dr Ahn or anyone else at the meeting," the judge notes in his order. "Samsung also has failed to supply the court with any evidence at all regarding other uses of the Apple-Nokia licence, or those of the other confidential licencees [Ericsson, Sharp and Philips, which were also mentioned in the document].
"In fact, despite acknowledging that many dozens of individuals at Samsung and its other council have knowledge of confidential licence terms that they had no right to access, at yesterday's hearing, Samsung's counsel repeatedly denied even one violation of the protective order, asserting that such a violation can only occur wilfully." He called Samsung's offers in the matter "insufficient".
He called the hiring by Samsung's lawyer of an outside company to examine Samsung's systems "the fox [being] permitted to investigate… the disappearance of chickens at the henhouse."
Apple made a copy of the licence available to Samsung's lawyers in March 2012 only for the purpose of Teece's analysis, in which he was writing an expert opinion for the Apple-Samsung case in Northern California. There, Apple was suing Samsung over a number of design and technical patents, while Samsung was claiming that Apple had infringed a number of Samsung's standards-essential patents. The jury decided in Apple's favour and against Samsung.
Samsung's lawyer was at pains during the court hearing ahead of Grewal's order to avoid suggestions that the South Korean company - which has battled in a number of countries with Apple over patent matters - had derived the information from the leaked document, despite being unable to say who inside the company had seen it.
'Nothing wrong has happened here'
Asked by Grewal whether the information that had leaked had been used in any negotiations, Samsung's lawyer said: "I'm denying that confidential information governed by the protective order learned that Samsung, that Samsung learned about from inadvertent disclosures, was used in a negotiation."
Susan Estrich, for Quinn Emanuel, insisted to Grewal that "Nothing wrong has happened here" but admitted that "Yes, there was a disclosure." She added: "Was it wilful - in this case, no." She said that courts have not previously sanctioned those where the disclosure is not wilful, and where those involved take measures to remedy the situation.
But Judge Grewal admonished Estrich and Samsung for their lack of action: "You've just told me you can't even tell me whether you've taken any steps in any of these other tribunals [where Samsung and Apple are fighting patent battles] to retract reliance upon this information."
Estrich said that the error occurred when "an associated redacted [the Apple-Nokia licence for Teece] - it wasn't as if we sent [out] a report with no redactions. He made a mistake. He left in a footnote that should have been redacted. There were two additional paragraphs."
The insiufficiently redacted document was then placed on an FTP site controlled by Quinn Emanuel, where Samsung staff and Teece could access documents needed for the court case in summer 2012. But the law firm said it has no record of who accessed the site - and had now employed a third party company called Stroz to make enquiries inside Samsung about who had downloaded the file and who had emailed it.
Samsung's staff offered to delete all the emails involving the file when Nokia raised objections at the meeting in June - which Melin, for Nokia, immediately insisted it could not do. If a violation of court privacy is suspected, the law says that the extent of the violation must be determined; deleting emails or other information would constitute destruction of evidence.
Apple's lawyer complained that Samsung has used the information from the disclosure "to craft arguments at the ITC [International Trade Commission, which can impose import bans to the US for patent violation]. "The ITC issued an opinion on the licensing negotiations that specifically accepted Samsung's argument in which this confidential information was used."
Samsung declined to comment or to confirm any of the details of the meeting with Nokia.
A Nokia spokesperson said: "There is nothing we can add to the court documents at this stage."
Apple declined to comment.
Text of Grewal's order
Transcript of the hearing (76 pages)
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