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07.27.2012 | Legal Advisory

Introduction
Apple recently received an e-discovery victory in their global patent battle with Samsung Electronics. On July 24, 2012, Federal Magistrate Judge Paul S. Grewel of the Northern District of California sanctioned Samsung for its failure to preserve emails after it should have reasonably anticipated Apple’s lawsuit. The ruling—which will allow the jury to draw an adverse inference against Samsung—could prove to be a game changer in a litigation where billions of dollars are at stake.

The ruling reaffirms the need for corporate entities to be vigilant in their document-preservation activities, even before litigation commences. The ruling also tackles the issue of email auto-deletion and serves as a warning to potential litigants who have auto-deletion policies.

To view the ruling, click here.

Background & Ruling
Apple sought an adverse jury instruction after learning that Samsung failed to disable the auto-delete function of its “mySingle” email system. Samsung’s proprietary mySingle system automatically deleted all emails every two weeks. Employees working in Samsung’s Korean offices used the mySingle email system, which required users to save their emails manually to their hard drive by selecting the “Save All” button in their email interface. In contrast, Samsung employees working in the United States used Outlook, which was configured to preserve email automatically in perpetuity.

In an August 4, 2010 meeting, Apple presented Samsung with evidence of Samsung’s infringement of Apple patents. On August 23, 2010, Samsung issued a litigation-hold notice to 27 Samsung employees notifying them of a “reasonable likelihood of future patent litigation between Samsung and Apple . . . .”¹ Apple filed suit on April 15, 2011. On April 21, and in the weeks following, Samsung sent a litigation hold notice to 2,700 Samsung employees. After April 21, Samsung provided its employees instructions detailing how to save emails using the mySingle system. But Samsung never “turned off” mySingle’s auto-delete functionality. Samsung admitted that there was no way to ensure that its employees were properly saving their emails. Emails that were not manually saved were automatically deleted every two weeks.

The court held that Samsung’s duty to preserve arose on August 23, 2011, the date Samsung issued litigation hold notices to a subset of employees. The language of Samsung’s August 23rd litigation hold notice, according to the court, confirmed that Samsung was aware of the “reasonable likelihood of future patent litigation.”² The court faulted Samsung for failing to send litigation hold notices beyond the 27 initial custodians and for failing to provide in-depth instructions to its employees regarding the “Save All” button until after the complaint was filed. The court also cited Samsung’s failure to audit its employees to ensure that they were correctly using the manual save option: “In light of its biweekly automatic destruction policy, Samsung had a duty to verify whether its employees were actually complying with the detailed instructions Samsung claims it communicated to them.”³

In sanctioning Samsung, the court noted the vast difference between the number of documents turned over by those employees using the mySingle system versus those using Outlook. Key Outlook-user custodians turned over thousands of relevant documents, but several key mySingle user custodians turned over few if any relevant documents. The court attributed this statistical anomaly to the auto-delete function of the mySingle system.

Under the court’s order, the jury will be told that “Samsung failed to preserve evidence after its duty to preserve arose.”⁴ In addition, the jury will be told in effect to presume that “relevant evidence was destroyed” and that “the lost evidence was favorable to Apple.”⁵ It will be left to the jury to decide whether this finding is “determinative, somewhat determinative, or not at all determinative in reaching [the jury’s] verdict.”⁶

Lessons
Lessons to be drawn from the ruling include:

• When litigation is reasonably anticipated, businesses should issue litigation holds to all potential custodians. There may be significant risk associated with notifying a subset of custodians when litigation is anticipated and then notifying a larger group of custodians once the litigation is filed.
• When litigation is reasonably anticipated, businesses should consider disabling any auto-delete functionality, at least for custodians who may have responsive documents. As the court pointed out, “[t]he burden to the parties and to the courts in cases such as this can be extraordinary. . . . But it is no answer to that burden simply to leave in place an [email deletion] tool and for seven months take almost no steps to avoid spoliation beyond telling employees not to allow what will otherwise certainly happen.”⁷
• The duty to preserve documents arises when there is a reasonable likelihood of litigation—which means the duty can be triggered before litigation is filed. Though this rule has become nearly axiomatic, Apple v. Samsung serves as a cautionary reminder of the consequences of failing to preserve documents before a case commences.
• If email preservation involves any manual steps by custodians, businesses should audit every custodian to assure that he or she is correctly following the preservation instructions and actually saving responsive documents.

¹ Apple v. Samsung Electronics, 11-cv-01846-LHK, 12 n.59 (N.D. Ca. July 24, 2012).
² Id. at 16.
³ Id. at 18.
⁴ Id. at 24.
⁵ Id. (emphasis in original).
⁶ Id.
⁷ Id.
This advisory was prepared by Eric Magnuson, a member of the Data Management, Security and Discovery practice group at Nutter McClennen & Fish LLP. For more information, please contact Eric or your Nutter attorney at 617.439.2000.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.