It seems like a matter of common sense that if someone regularly and systematically does business within the United States, that person or business should reasonably expect to be summoned or subpoenaed when necessary, either to produce relevant documents, or to produce a witness to testify about a topic only that company knows about.
Such a simple matter of due process seems like a relatively straightforward matter of American civil procedure. It has been largely non-controversial for decades. However, recently, large corporations have gotten strong enough to test the patience (and resources) of litigants, including government officials.
For example, take Amazon and Google.
Amazon has appointed a registered agent for service of process in New York (CT Corporation), so why not just serve Amazon with a subpoena duces tecum?
Apparently, it's not so simple.
An article published on AssociatesMind.com details how Amazon does not typically cooperate with, nor respond to, routine subpoenas for documents. Amazon allegedly forces all litigants to seek a third party subpoena from the Thurston County Clerk's office in Washington State, where Amazon's headquarters is located.
Such a process is likely to cost a litigant thousands of dollars in legal fees. Further, if Amazon objects to the scope of the subpoena, an out-of-state litigant would need to retain local counsel in Olympia, Washington, to litigate a motion to compel there.
Amazon's obstructive efforts are no idle threat. In one criminal case, a Grand Jury sitting in Wisconsin sought a representative sample of used book buyers, in a criminal case involving mail fraud and wire fraud there.
Amazon issued its usual blanket objections, forcing the issue to be litigated in federal court. Ultimately, the federal government backed down.
The standard response on the Internet was to applaud Amazon's resistance. But before applauding Amazon's seeming defense of privacy rights, think about the precedent set here...
A legitimately convened Grand Jury had decided that Amazon's documents were relevant to an ongoing criminal investigation.
Amazon was able to hire an army of private lawyers to successfully keep its business records from the Grand Jury. Despite its claims, Amazon was not interested solely in the pursuit of noble privacy. Amazon was protecting its business, by telegraphing that it is not held to the same standards of disclosure and due process as everyone else.
Google does the same thing.
Why should wealthy multinational corporations be entitled to use the threat of protracted, expensive litigation to frustrate due process?
Monday, March 2, 2015
Friday, November 15, 2013
Samsung and Its Outside Counsel Facing Sanctions For Breaching Confidentiality: But Will the Punishment Fit the Offense?
Before Apple and Samsung litigated their now epic patent trial before a federal district court, they were engaged in routine discovery practices, which involved the exchange of the fierce competitors’ highly sensitive licensing information.
To be sure, such disclosure is commonplace and indeed required by discovery in the United States' Federal Rules of Civil Procedure.
To address the potential mishandling of proprietary and confidential information, parties routinely stipulate to entry of a “Protective Order.”
This stipulation takes the form of a Court Order which allows the parties and their counsel to designate documents and information into categories or tiers.
When documents contain highly sensitive information, such as pricing or key licensing terms, the parties are usually able to mark documents as “Outside Counsel’s Eyes Only,” and file such documents under a strict seal so the public cannot get access through the Court’s docket.
Responsible outside counsel take great pains to respect these orders, often at significant cost and inefficiency. Multiple drafts of the same document must be created and digital firewalls maintained with redactions and password-protected file folders.
These day-to-day procedures involved in handling competitors' sensitive data can be onerous to the parties and their outside counsel litigating these cases, but such measures are viewed as necessary to ensure that litigants feel that their sensitive information is not being acquired by their competitors in the guise of discovery exchange.
In the now famous Apple/Samsung patent case, highly confidential licensing terms were apparently contained in a draft expert report on damages that was forwarded to Samsung’s internal personnel without any redactions whatsoever.
The leak of the confidential information only came to light after the case was effectively over, when Samsung happened to be negotiating a license with third party Nokia. According to testimony, a Samsung executive told Nokia that he knew the terms of the Apple-Nokia license and was able to recite its terms verbatim during the negotiation. Nokia told Apple, who demanded a formal investigation.
After a Court-ordered investigation, it turns out that Samsung’s outside counsel had posted a draft of its expert’s report on a client file-sharing site that was accessible by Samsung’s staff, and e-mailed instructions for accessing the site, which included over fifty Samsung employees who were not permitted to access the highly confidential information contained therein.
Samsung's outside counsel has essentially admitted that all of the above did indeed occur, but denies that the violation was intentional. Samsung incredibly argues that no sanctions whatsoever are warranted, despite the harm to Apple and the threat to the integrity of the discovery process.
The Magistrate Judge appears to be mulling what sanctions are appropriate for the apparent violation of the Court’s Protective Order.
Frequently, outside counsel entering into the exchange of sensitive discovery materials during intellectual property litigation are asked by their clients whether to trust that the terms of protective orders are respected by their adversaries.
And the standard response that outside counsel typically give to their clients is supposed to allay their concerns: Any violations of the Protective Order wil be swiftly punished by the Court, thus deterring misconduct.
But let’s face reality for a moment: Unless the fines imposed on Quinn Emanuel, Samsung’s outside counsel here, are truly draconian in nature, the misconduct is likely to go largely unpunished.
Quinn Emanuel undoubtedly billed millions upon millions of dollars in legal fees to Samsung for its litigation services, and any fine imposed is likely to be paltry in comparison to the violence such conduct does to the integrity of the discovery process and the commercial harm to Apple.
And, in the event that the fines imposed the Magistrate were truly draconian in nature, what is the likelihood that Judge Koh would enforce them? The Court has already reduced the damages awarded to Apple against Samsung by the jury from over $1billion to less than half.
Further, even if Judge Koh found the nerve to impose a draconian penalty against the misconduct, Quinn Emanuel and Samsung will inevitably appeal to the U.S. Court of Appeals for the Ninth Circuit. What are the odds that that California-based appellate court would sustain a draconian penalty against Samsung and/or its outside counsel? Slim to none, I suspect.
Therefore, while Quinn Emanuel very well may have inadvertently violated the Protective Order rather than willfully, parties facing high-stakes intellectual property litigation requiring the exchange of highly sensitive data with competitors would be well advised to consider the risks inherent in litigating against a fierce adversary with all the wrong incentives, in a legal system that is far too tolerant of discovery abuses.