Samsung's Counsel Get a Slap on the Wrist for Breaching Confidentiality

As discussed and predicted here in November 2013, Samsung's outside counsel were found to have violated the Court's "Protective Order" in the Apple patent litigation, but received nothing more than "public shaming" from a U.S. Judge.

To address the potential mishandling of proprietary and confidential information during litigation, 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 became clear 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 essentially admitted that all of the above did indeed occur, but denied that the violation was intentional. Samsung argued that no sanctions whatsoever are warranted, despite the harm to Apple and the threat to the integrity of the discovery process.

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.

Not this time.

The Judge found that the only appropriate punishment for Quinn is its "public shaming."  Apparently, that shame will follow the firm all the way to the bank.

As we previously wrote, Americans live under a legal system that is far too tolerant of discovery abuses.