Judge considers sanctions against Samsung, lawyers in dispute with Apple

The lawyers may have provided their clients access to highly confidential information, the judge said

A court in California is considering sanctions against Samsung Electronics and its lawyers in view of concerns that the external counsel may have shared confidential information from Apple with Samsung, according to a court document.

"Having finally crawled out from under the boxes, it appears to the undersigned that if anything was breached, it was this court's protective order, and that sanctions against Samsung and its attorneys are warranted," noted U.S. Magistrate Judge Paul S. Grewal of the U.S. District Court for the Northern District of California, San Jose division, in a ruling Friday.

The judge went through boxes of Samsung's documents to get to the bottom of allegations of the suspected breach of confidential information, including information on Apple's patent licensing agreements with Nokia, Ericsson, Sharp and Philips, which were marked for viewing by the attorneys alone.

Apple provided the information to Samsung's law firm Quinn Emanuel Urquhart & Sullivan during the discovery phase of a lawsuit in California in which Apple was awarded damages of US$1.05 billion against Samsung. Judge Lucy Koh vacated $450 million in damages, and ordered a retrial to recalculate damages which comes up Tuesday.

Key terms of the four patent license agreements were contained in a draft expert report on damages that was forwarded to Samsung without redaction, according to a ruling in October by the judge.

The possible leak of the confidential information came to light in June when Samsung was negotiating a license with Nokia. According to testimony from Nokia's chief intellectual property officer, Paul Melin, a Samsung executive Seungho Ahn told him at the meeting that he knew the terms of Nokia's licensing agreement with Apple. To prove to Nokia that he knew the confidential terms of the Apple-Nokia license, Ahn recited the terms of the license, according to Melin's declaration.

The Samsung executive later testified in writing that he only "pretended" to have seen the contract, according to an Apple lawyer. Quinn suggested there may have been a miscommunication at the meeting, saying neither the Samsung nor Nokia officials present spoke English as a first language.

Samsung's outside counsel posted the expert report on an FTP (file transfer protocol) site that was accessible by Samsung staff, and emailed instructions for accessing the site, which over 50 Samsung employees including licensing executives are said to have accessed, Judge Grewal noted in the October ruling. In a hearing, Samsung's counsel repeatedly "denied even one violation of the protective order, asserting that such a violation can only occur willfully."

Sharing the information with Samsung could amount to a violation of a "protective order" covering the confidentiality of third-party information shared with the outside counsel. Sanctions in civil suits usually take the form of fines.

The court "still does not have a complete picture of the events giving rise to this procedural flurry," wrote Judge Grewal in his order on Friday.

Based on the evidence and arguments submitted, an "outline does emerge suggesting sanctions" for violations by Quinn Emanuel, which is said to have failed to redact the business information from the expert report, resulting in the "pervasive distribution" of the information to Samsung employees who were not authorized to have access to it, the Judge ruled. Samsung is also said to have made "wrongful use" of the information in preparations for negotiations with Nokia and Ericsson.

Samsung and Quinn Emmanuel have been asked to file a brief by Dec. 2, to show cause why they should not be sanctioned for the violations. Apple and Nokia are also allowed to submit a brief by this same date proposing appropriate sanctions.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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