Apple v Sam­sung case pro­vides time­ly reminder of lit­i­ga­tion doc­u­ment reten­tion requirements

In Brief

A recent case involv­ing Apple and Sam­sung pro­vides a time­ly reminder to busi­ness­es about the impor­tance of prop­er doc­u­ment reten­tion when cur­rent or antic­i­pat­ed lit­i­ga­tion arises. 

Doc­u­ment reten­tion in Australia

Aus­trali­a’s legal require­ments in rela­tion to doc­u­ment reten­tion are often met with con­cern due to uncer­tain­ty about obligations. 

Lit­i­ga­tion is a key area in which con­fu­sion about doc­u­ment reten­tion oblig­a­tions can have dam­ag­ing con­se­quences for com­pa­nies and businesses.

The posi­tion in Aus­tralia is that records which are rel­e­vant, or are rea­son­ably like­ly to be rel­e­vant, to any cur­rent or antic­i­pat­ed future legal pro­ceed­ings or reg­u­la­to­ry inves­ti­ga­tions must be retained and pro­duced if required, dur­ing the lit­i­ga­tion process.

If there is any doubt as to whether a record is rea­son­ably like­ly to be required in any ongo­ing or poten­tial future legal pro­ceed­ings, it should be pre­served (See British Amer­i­can Tobac­co Aus­tralia Ser­vices Lim­it­ed v McCabe [2002] VSCA 197). In Vic­to­ria, this prin­ci­ple has been cod­i­fied by statute and car­ries with it a max­i­mum of 5 years impris­on­ment, a fine or both. Not only can direc­tors and offi­cers be found guilty of this offence, but so too can a body cor­po­rate (See Crimes Act 1958 (Vic)).

US per­spec­tive

The recent stoush between Apple and Sam­sung in the Cal­i­forn­ian Dis­trict Court case Apple Inc v. Sam­sung Elec­tron­ics Co Ltd et al., C 11 – 1846 pro­vides an exam­ple of how busi­ness­es eas­i­ly fall foul of doc­u­ment reten­tion requirements.

The case involves a claim by Apple of infringe­ment by Sam­sung of Apple patents. In the pro­ceed­ings Apple suc­ceed­ed in obtain­ing an order that the jury be instruct­ed to draw an adverse infer­ence against Sam­sung in respect of the destruc­tion by Sam­sung of emails deemed to be rel­e­vant to the patent infringe­ment claim brought against it.

In grant­i­ng the adverse infer­ence order, the Cal­i­forn­ian Dis­trict Court found that Sam­sung had ​“con­scious­ly dis­re­gard­ed” its oblig­a­tions to pre­serve rel­e­vant evi­dence because:

1. after the future lit­i­ga­tion had become rea­son­ably fore­see­able and even after the lit­i­ga­tion had com­menced, Sam­sung failed to dis­able the auto-delete func­tion used in its email system;
2. Sam­sung failed to ade­quate­ly dis­trib­ute to its employ­ees ​‘lit­i­ga­tion hold’ notices requir­ing them to pre­serve all rel­e­vant documents;
3. Sam­sung ini­tial­ly failed to prop­er­ly edu­cate its employ­ees about the require­ments for retain­ing any doc­u­ments poten­tial­ly rel­e­vant to Apple’s claim; and;
4. Sam­sung failed to mon­i­tor its employ­ees, at all rel­e­vant times, to ensure that they were com­ply­ing with the doc­u­ment reten­tion requirements.

The Cal­i­forn­ian court’s inher­ent pow­ers include, much like Aus­tralian courts, the abil­i­ty to appro­pri­ate­ly penalise a par­ty who prej­u­dices its oppo­nent through the destruc­tion of evi­dence that the par­ty ought to have rea­son­ably known was rel­e­vant to the lit­i­ga­tion. A par­ty that destroys rel­e­vant doc­u­ments can also be found guilty of con­tempt of court or per­vert­ing the course of jus­tice. In this instance, the court instruct­ed the jury to pre­sume that rel­e­vant evi­dence was destroyed and that the lost evi­dence was favourable to Apple. Clear­ly this could have a huge impact on the out­come of Apple’s patent infringe­ment claim against Samsung.

Lessons for Australia

When lit­i­ga­tion occurs, or there is a rea­son­able like­li­hood of lit­i­ga­tion occur­ring, a busi­ness must imme­di­ate­ly take all nec­es­sary steps to ensure that it com­plies with its oblig­a­tions to the court to retain any rel­e­vant or poten­tial­ly rel­e­vant documents.

As the Apple and Sam­sung dra­ma high­lights, this means tak­ing an active approach to edu­cat­ing and mon­i­tor­ing employ­ees in rela­tion to retain­ing rel­e­vant doc­u­ments, sus­pend­ing any oper­a­tional doc­u­ment reten­tion or destruc­tion pol­i­cy in respect of any poten­tial­ly rel­e­vant records and almost cer­tain­ly dis­abling any auto­mat­ic doc­u­ment dele­tion sys­tem that could affect rel­e­vant documents.

For fur­ther infor­ma­tion please con­tact Swaab Attorneys.