Apple v Samsung case provides timely reminder of litigation document retention requirements
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  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)).
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:
- 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;
- Samsung failed to adequately distribute to its employees ‘litigation hold’ notices requiring them to preserve all relevant documents;
- Samsung initially failed to properly educate its employees about the requirements for retaining any documents potentially relevant to Apple’s claim; and;
- 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.