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The $1.05 billion award to Apple in its patent infringement case against Samsung made worldwide headlines in August. But only those who closely follow e-discovery issues realized the case involved contentious proceedings over failure to preserve emails and other data that nearly resulted in the jury receiving adverse inference instructions against both companies.

An adverse inference instruction means a judge will tell the jury to assume missing documents were favorable to the other side. In Apple Inc. v. Samsung Electronics Co. Ltd., a magistrate judge ordered an adverse inference instruction against Samsung for automatically deleting emails. But the trial judge found Apple had failed in its data preservation duties, too, and ordered identical adverse inferences instructions against both parties, effectively canceling each other out. At the request of the parties, the judge agreed not to give the dueling instructions to the jury.

Although the reasons behind the failure of both companies to adhere to legal hold rules are not clear, the spoliation may have been the unintended consequence of IT policies designed without considering e-discovery consequences: at Samsung, a system that automatically deleted emails after two weeks; and at Apple, a policy requiring employees to limit the amount of email they retained. The case underscores the importance of in-house counsel educating their clients and IT colleagues on the risks of e-discovery violations, and following through once a litigation hold is triggered to assure all affected employees are in compliance.

“Most employees, even executives, do not have a sophisticated understanding of the discovery rules,” says Miller Canfield Principal B. Jay Yelton. “Litigation is typically a distraction from their normal duties. Without some education and training, they can't be expected to understand their obligations under a litigation hold.”

Auto Erase

In Samsung's case, the e-discovery violation involved a corporate system that automatically deletes email in 14 days, unless an employee manually chooses to retain it for a longer period.

In August 2010, Apple delivered to Samsung a detailed summary of infringement claims involving patents on some of its smartphone and tablet technology. Soon after, Samsung sent an email to 27 employees stating there was “a reasonable likelihood of future patent litigation between Samsung and Apple” and asking them to “preserve any and all such documents that may be relevant to the issues.” But Samsung failed to turn off the auto-delete function.

Apple filed suit against Samsung in April 2011 in the Federal District Court for the Northern District of California. Samsung sent out another communication telling more than 2,700 employees to preserve documents and held meetings to explain the company's obligations. However, it still did not disable the auto-delete.

Apple later went to court seeking sanctions against Samsung for failing to produce relevant emails. In granting the request, Magistrate Judge Paul Grewal, who was assisting Federal District Court Judge Lucy Koh on the case, noted that “[Samsung] has never attempted to verify whether its employees were complying with the instructions they were told to follow.” He reiterated a party's obligation to preserve evidence from the moment that litigation is reasonably anticipated. “In effect,” Grewal said, “[Samsung] kept the shredder on long after it should have known about this litigation.”

Grewal ordered the trial jury on July 25 to be instructed that Apple had proved relevant evidence was destroyed and the lost evidence was favorable to Apple's case.

Tables Turned

The next day, Samsung filed its own motion for spoliation, citing Apple's failure to issue litigation hold notices until April 2011. Grewal denied the motion as untimely. Samsung asked Koh to amend the order. In a stunning turnaround, Koh suggested in an Aug. 21 order that the prior ruling against Samsung had been too harsh. Adverse inferences are “among the most severe sanctions a court can administer,” she wrote, noting that Samsung had produced more than 12 million pages of documents, including upwards of 80,000 emails.

As for Samsung's spoliation claim, she found that although Apple did not automatically delete emails, “employees whose email accounts are too large may receive automatic notices requesting that they reduce the size of their email accounts.”

Although Apple had argued that Samsung should have preserved emails starting in August 2010, Apple itself did not issue any litigation hold notices until after it filed its lawsuit in April 2011. Several Apple custodians, including designers and inventors on the patents, didn't receive notices until September 2011, December 2011 and January 2012, Koh said.

Finding both parties at fault, Koh ordered identical adverse inference instructions for Apple and Samsung that would have advised jurors it was up to them to decide whether the failure to
preserve evidence was important in reaching a verdict. In light of her ruling, the two parties told the court they preferred that no instruction be given, and the judge agreed.

Ralph Losey, partner and e-discovery counsel at Jackson Lewis, says the fact that Koh overruled the magistrate judge may have spared Apple from having its ultimate court victory overturned.

“The magistrate judge's adverse inference jury instruction against Samsung would have been determinative of the issues at trial. A case should not be decided by discovery,” Losey says. “My guess is that if that decision was not changed, the case would have been reversed on appeal. Judge Koh did Apple a tremendous favor by amending the original order. She is a smart young judge.”

Lessons Reiterated

The case underscores several preferred e-discovery practices.

Parties in a matter should discuss the scope of preservation at the outset of litigation or when a preservation obligation arises, according to BakerHostetler Partner Gil Keteltas.

“The parties can discuss the likely relevance of certain information and sources and agree to limits where appropriate. Do not be afraid to argue that recent email is not relevant to a case involving events that occurred long before,” says Keteltas, who argues the deleted emails in Apple v. Samsung likely weren't germane.

If litigation is reasonably foreseeable, ignoring the necessary steps to preserve relevant evidence can be a costly mistake.

“If you analyze a potential trigger and determine it is insufficient to warrant issuing a litigation hold, put a memo in the file to that effect,” Yelton says. “Even if the court disagrees with your conclusion, the memo can show good faith and negate, or lessen, any sanction.”

He adds that Apple v. Samsung also reiterates the importance of disabling auto-delete systems for key custodians' email accounts, giving clear instructions to employees regarding their duty to preserve and following up regularly to make sure they are in compliance.

Read an Online Exclusive about the necessity of far-reaching discovery

The $1.05 billion award to Apple in its patent infringement case against Samsung made worldwide headlines in August. But only those who closely follow e-discovery issues realized the case involved contentious proceedings over failure to preserve emails and other data that nearly resulted in the jury receiving adverse inference instructions against both companies.

An adverse inference instruction means a judge will tell the jury to assume missing documents were favorable to the other side. In Apple Inc. v. Samsung Electronics Co. Ltd., a magistrate judge ordered an adverse inference instruction against Samsung for automatically deleting emails. But the trial judge found Apple had failed in its data preservation duties, too, and ordered identical adverse inferences instructions against both parties, effectively canceling each other out. At the request of the parties, the judge agreed not to give the dueling instructions to the jury.

Although the reasons behind the failure of both companies to adhere to legal hold rules are not clear, the spoliation may have been the unintended consequence of IT policies designed without considering e-discovery consequences: at Samsung, a system that automatically deleted emails after two weeks; and at Apple, a policy requiring employees to limit the amount of email they retained. The case underscores the importance of in-house counsel educating their clients and IT colleagues on the risks of e-discovery violations, and following through once a litigation hold is triggered to assure all affected employees are in compliance.

“Most employees, even executives, do not have a sophisticated understanding of the discovery rules,” says Miller Canfield Principal B. Jay Yelton. “Litigation is typically a distraction from their normal duties. Without some education and training, they can't be expected to understand their obligations under a litigation hold.”

Auto Erase

In Samsung's case, the e-discovery violation involved a corporate system that automatically deletes email in 14 days, unless an employee manually chooses to retain it for a longer period.

In August 2010, Apple delivered to Samsung a detailed summary of infringement claims involving patents on some of its smartphone and tablet technology. Soon after, Samsung sent an email to 27 employees stating there was “a reasonable likelihood of future patent litigation between Samsung and Apple” and asking them to “preserve any and all such documents that may be relevant to the issues.” But Samsung failed to turn off the auto-delete function.

Apple filed suit against Samsung in April 2011 in the Federal District Court for the Northern District of California. Samsung sent out another communication telling more than 2,700 employees to preserve documents and held meetings to explain the company's obligations. However, it still did not disable the auto-delete.

Apple later went to court seeking sanctions against Samsung for failing to produce relevant emails. In granting the request, Magistrate Judge Paul Grewal, who was assisting Federal District Court Judge Lucy Koh on the case, noted that “[Samsung] has never attempted to verify whether its employees were complying with the instructions they were told to follow.” He reiterated a party's obligation to preserve evidence from the moment that litigation is reasonably anticipated. “In effect,” Grewal said, “[Samsung] kept the shredder on long after it should have known about this litigation.”

Grewal ordered the trial jury on July 25 to be instructed that Apple had proved relevant evidence was destroyed and the lost evidence was favorable to Apple's case.

Tables Turned

The next day, Samsung filed its own motion for spoliation, citing Apple's failure to issue litigation hold notices until April 2011. Grewal denied the motion as untimely. Samsung asked Koh to amend the order. In a stunning turnaround, Koh suggested in an Aug. 21 order that the prior ruling against Samsung had been too harsh. Adverse inferences are “among the most severe sanctions a court can administer,” she wrote, noting that Samsung had produced more than 12 million pages of documents, including upwards of 80,000 emails.

As for Samsung's spoliation claim, she found that although Apple did not automatically delete emails, “employees whose email accounts are too large may receive automatic notices requesting that they reduce the size of their email accounts.”

Although Apple had argued that Samsung should have preserved emails starting in August 2010, Apple itself did not issue any litigation hold notices until after it filed its lawsuit in April 2011. Several Apple custodians, including designers and inventors on the patents, didn't receive notices until September 2011, December 2011 and January 2012, Koh said.

Finding both parties at fault, Koh ordered identical adverse inference instructions for Apple and Samsung that would have advised jurors it was up to them to decide whether the failure to
preserve evidence was important in reaching a verdict. In light of her ruling, the two parties told the court they preferred that no instruction be given, and the judge agreed.

Ralph Losey, partner and e-discovery counsel at Jackson Lewis, says the fact that Koh overruled the magistrate judge may have spared Apple from having its ultimate court victory overturned.

“The magistrate judge's adverse inference jury instruction against Samsung would have been determinative of the issues at trial. A case should not be decided by discovery,” Losey says. “My guess is that if that decision was not changed, the case would have been reversed on appeal. Judge Koh did Apple a tremendous favor by amending the original order. She is a smart young judge.”

Lessons Reiterated

The case underscores several preferred e-discovery practices.

Parties in a matter should discuss the scope of preservation at the outset of litigation or when a preservation obligation arises, according to BakerHostetler Partner Gil Keteltas.

“The parties can discuss the likely relevance of certain information and sources and agree to limits where appropriate. Do not be afraid to argue that recent email is not relevant to a case involving events that occurred long before,” says Keteltas, who argues the deleted emails in Apple v. Samsung likely weren't germane.

If litigation is reasonably foreseeable, ignoring the necessary steps to preserve relevant evidence can be a costly mistake.

“If you analyze a potential trigger and determine it is insufficient to warrant issuing a litigation hold, put a memo in the file to that effect,” Yelton says. “Even if the court disagrees with your conclusion, the memo can show good faith and negate, or lessen, any sanction.”

He adds that Apple v. Samsung also reiterates the importance of disabling auto-delete systems for key custodians' email accounts, giving clear instructions to employees regarding their duty to preserve and following up regularly to make sure they are in compliance.