By Cynthia Courtney, Esq., VP, Advisory and Engineering Group
Unless you have been marooned on a desert island that happens to have no internet access, you have probably heard that an adverse inference instruction was imposed against Samsung in the patent infringement case brought against it by Apple. When I first read that Samsung was sanctioned for spoliation because it had failed to discontinue its long-time practice of auto-deleting e-mails after the passage of two weeks, my reaction was “what were they thinking?” As in, that is a really aggressive deletion practice, and it is unrealistic for a company to expect its IT staff or e-discovery vendor, not to mention employees, to identify and save important e-mails to another location in that brief time frame. As in, when you are being sued for patent infringement by one of the big(est) boys, you need to be uber-careful about things like preserving your top executives’ e-mail. As I learned, it was worse than I thought.
Apple sued Samsung Electronics Corporation, LTD (SEC), and two other Samsung subsidiaries. SEC is based in South Korea. The other Samsung defendants use Microsoft Outlook, but SEC uses—and has used for a number of years—a home-grown, web-based e-mail system called mySingle, which has been programmed to delete all e-mail after two weeks. Samsung uses this internally-developed application, and imposes these deletion requirements, because (1) the practice guards against the danger that confidential business information will be misappropriated if a laptop is lost or stolen; (2) the practice is cheaper than storing e-mails for 30 days; (3) it reduces the information that could get into the wrong hands through misdirected e-mail or hacking; and (4) the policy best complies with Korean privacy law. SEC employees can save all of their e-mails to their hard drive by clicking on a “save all” button once every two weeks; or, they can select and save certain e-mails. They can also get a supervisor’s permission to use Outlook to archive e-mail.
On top of SEC’s failure to discontinue the 2-week auto-deletion practice, it failed to timely implement litigation hold measures. Apple argued and the court ruled that the duty to preserve arose at the time of the August 4, 2010 when Apple laid out its patent claims against the Samsung companies at a meeting. SEC argued that the duty to preserve did not arise until the lawsuit was actually filed in 2011; however, the initial litigation hold notice went out to the small number of key employees on August 20, 2010, right after the Apple/Samsung meeting. The notice stated that there was a “reasonable likelihood” of litigation if a settlement was not reached. This was not lost on the judge, who informed SEC that it couldn’t have things both ways by being aware enough to issue a (half-hearted) litigation hold and then arguing that the preservation obligation did not arise until the complaint was filed; moreover, irrespective of when the duty arose, Samsung did not implement adequate preservation measures as to SEC e-mails.
SEC did not discontinue the auto-deletion practice, although the August 20, 2010 notice did inform a small number of key custodians and later over 2700 custodians, of the need to preserve relevant ESI relating to a prescribed list of litigation issues. Unfortunately, the employees were expected to self-identify and self-collect relevant e-mail from the mySingle system. Samsung never verified with custodians whether they were following the directions they were given at the onset of the case. Not surprisingly, employees who used the mySingle system produced a fraction of the e-mails produced by employees who used Outlook. Among those who used mySingle were top SEC executives who were thought to have highly relevant ESI.
As if all of this were not bad enough, it transpired that SEC had been down this road before and had received an adverse inference instruction for the failure to suspend the mySingle auto-delete function. In Mosaid v. Samsung, 348 F. Supp. 2d 332 (D.N.J. 2004), a federal magistrate judge in New Jersey sanctioned Samsung for the same practice.
Indeed—“what were they thinking?” As the judge noted, Samsung’s attempt to “mend it, don’t end it” fell far short of the legal requirements to timely implement appropriate and sufficient litigation preservation measures.