Apple Inc v Samsung Electronics Co Limited (No 2)

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FEDERAL COURT OF AUSTRALIA

Apple Inc. v Samsung Electronics Co. Limited (No 2) [2012] FCA 1358

Citation: Apple Inc. v Samsung Electronics Co. Limited (No 2) [2012] FCA 1358
Parties: APPLE INC. v SAMSUNG ELECTRONICS CO. LIMITED
File number: NSD 1243 of 2011
Judge: COWDROY J
Date of judgment: 10 December 2012
Catchwords:

PRACTICE AND PROCEDURE: Privilege – claim for privilege made in respect of documents produced in reasonable contemplation of litigation – challenge to basis of claim for privilege – evidence in support of privilege claim unsatisfactory – court inspecting documents for which privilege is claimed to determine whether privilege is properly maintainable – claim for privilege upheld

PRACTICE AND PROCEDURE: privilege – whether partial disclosure of documents has resulted in waiver of privilege – claim for waiver upheld

Cases cited: Abigroup Ltd v Atkins (1997) 42 NSWLR 623
Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 137 ALR 28
Attorney-General (NT) v Maurice (1986) 161 CLR 475
Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 37
Australian Competition and Consumer Commission v
Prysmian Cavi e Sistemi Energia SRL (No 2) (2012) 287 ALR 760
Australian Competition and Consumer Commission v Australian Safeway Stores (1998) 81 FCR 526
AWB Limited v Cole and Anor (2006) 152 FCR 382
AWB Ltd v Cole and Anor (No 5) (2006) 155 FCR 30
Barnes v Commissioner for Taxation (2007) 242 ALR 601
Ensham Resources Pty Limited v AIOI Insurance Company Limited [2012] FCA 710
Esso Australia Resources Limited v Federal Commissioner of Taxation (1999) 201 CLR 49
Fair Work Ombudsman v Quest South Perth Pty Ltd [2012] FCA 608
FederalCommissioner of Taxation v Coombes (1999) 164 ALR 131
Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501
Kennedy v Wallace and Others (2004) 142 FCR 185
Kirby v Centro Properties Ltd (No 2) (2012) 87 ACSR 229
Mann v Carnell (1999) 201 CLR 1
Mitsubishi Electric Pty Ltd v Victorian Work Cover Authority (2002) 4 VR 332
National Crime Authority v S (1991) 29 FCR 203
Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44
Nine Films and Television Pty Ltd v Ninox Television Ltd (2005) 65 IPR 442
Osland v Secretary, Department of Justice (2008) 234 CLR 275
Re Southland Coal Pty Ltd (2006) 203 FLR 1
Rich v Harrington (2007) 245 ALR 106
Rio Tinto Ltd v Commissioner of Taxation (2005) 224 ALR 299
Seven Network Limited and Anor v News Limited and Ors [2005] FCA 142
Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No 2) [2007] FCA 1445
Trade Practices Commission v Sterling (1979) 36 FLR 244
Waterford v Commonwealth of Australia (1987) 163 CLR 5
Wheeler v Le Marchant (1881) 17 ChD 675
Date of hearing: 20 & 24 September 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 95
Counsel for the Applicant: Mr CA Moore with Dr RCA Higgins
Solicitor for the Applicant: Herbert Smith Freehills
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Details
Case
[2012] FCA 1358
Decision Date

CaseChat Overview and Summary

Apple Inc v Samsung Electronics Co Limited (No 2) involved a dispute between two multinational technology companies over patent infringement and licensing of technology essential to mobile telecommunications standards. The proceedings included claims and counterclaims regarding the use of baseband chip set technology and allegations of anticompetitive conduct. Apple claimed that Samsung infringed its patents and engaged in anticompetitive practices by refusing to license the patents on fair terms, while Samsung counterclaimed for patent infringement and sought declarations regarding the validity of its patents. The case involved complex issues of patent law and competition law, including the interpretation of FRAND obligations under international telecommunications standards.

The court was tasked with deciding several legal issues, including whether certain documents were privileged and whether partial disclosure had resulted in the waiver of privilege. Samsung claimed privilege over certain documents, asserting that they were created in reasonable contemplation of litigation and for the purpose of obtaining legal advice. Apple challenged the basis of this claim, arguing that Samsung’s representative lacked personal knowledge of the documents and their creation. Additionally, Apple contended that partial disclosure of privileged documents resulted in a waiver of privilege. The court had to determine whether Samsung's claim for privilege was valid and whether the partial disclosure of certain documents warranted a finding of waiver.

The court found that Samsung's claim for privilege was established for the documents in question, as they were created in reasonable contemplation of litigation and for the purpose of obtaining legal advice. However, the court also determined that privilege had been waived with respect to certain annexures due to partial disclosure. The court examined the nature of the documents and the circumstances of their creation, concluding that there was a real prospect of litigation when the documents were produced. The court rejected Samsung's arguments regarding waiver, finding that the partial disclosure of the documents resulted in the loss of privilege for those specific parts of the documents. The court provided the parties with an opportunity to review the judgment and make submissions on confidentiality before it was made publicly available.

The court vacated Order 2 of the orders made by Cowdroy J on 30 November 2012 and noted that the confidentiality regime agreed to by the parties remained in place. The court's decision highlighted the importance of personal knowledge and the circumstances of document creation in determining the validity of privilege claims, while also underscoring the consequences of partial disclosure in the context of litigation.

Orders

Orders of the court

1. Order 2 of the orders made by Cowdroy J on 30 November 2012 be vacated.

THE COURT NOTES THAT:

2. The confidentiality regime agreed to by the parties remains in existence between the parties.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Order 2 of 30 November 2012 was intended to provide parties with an opportunity to review the judgment to consider whether any portion of the judgment should be amended pursuant to s 50 of the Federal Court Act 1976 (Cth). Pursuant to such orders, the parties applied to the Court for amendment of the draft reasons. These reasons have therefore been amended from the version which was given to the parties on 30 November 2012.BACKGROUND The principal proceedings between the parties involve both a claim by Apple against Samsung, and a cross-claim by Samsung against Apple. Similar claims have been commenced in several other countries. The proceedings were commenced by Apple on 29 July 2011. In a cross claim filed in this Court on 16 September 2011, Samsung claims Apple has used patents concerned with technology used in electronic equipment known as baseband chip sets without authorisation from Samsung. The equipment enables connectivity between electronic devices such as a mobile telephone or a tablet computer and allows these devices to communicate with a base station. Pursuant to the requirements of an international organisation known as the European Telecommunications Standards Institute (‘ETSI’) such patents are required to be licensed for use by mobile handset makers, because the patents are essential for the implementation of mobile telecommunication standards known as the 3GPP Universal Mobile Telecommunication Standards (‘UMTS’). Such standards must be incorporated in mobile handsets to enable them to operate on the UMTS 3G mobile networks, which are used extensively throughout Australia and the world. The Court has been informed that Samsung has declared to ETSI that it will license the use of technology the subject of such patents on fair, reasonable and non-discriminatory (‘FRAND’) terms. Samsung alleges that it holds patents in respect of the base band chip sets. In its cross-claim, Samsung seeks declarations of infringements of its patents. It also states that it is willing to license the patents, but that it has not yet reached an agreement with Apple upon the terms of such license. Apple denies patent infringement and claims that the patents are invalid on several grounds. Apple also alleges that Samsung is engaged in anticompetitive conduct contrary to provisions of the Competition and Consumer Act 2010 (Cth) by refusing to licence the patents to Apple and thereby preventing it from selling three of its products, namely the iPhone 4, iPhone 4S and iPad 2. Apple further claims that an attempt by Samsung to give effect to an anticompetitive condition from its agreement between itself and a component supplier to Apple, namely Qualcomm (‘the Qualcomm agreement’), also constitutes a breach of that Act. As a consequence the issues arising in the principal proceedings will concern, amongst other things, Samsung’s purpose or strategy in engaging in the conduct complained of; whether Samsung was genuine in its attempts to reach agreement on FRAND terms with Apple, and why Samsung took steps to give effect to the Qualcomm agreement.CLAIMS FOR FURTHER DISCOVERY

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Samsung has referred to numerous authorities relating to waiver where that involves motive, purpose or state of mind being put in issue by pleading or evidence. Taking into consideration the nature of the report, these issues do not arise. The report is one concerning factual issues. Accordingly the Court rejects Samsung’s submissions on this aspect.CONCLUSION For the reasons referred to earlier in this decision the Court finds that the claim for privilege by Samsung in respect of the documents contained in Annexure D is established. With respect to the claim of waiver, the Court finds that privilege has been waived with respect to annexures YTL-2 and YTL-3 to the witness statement of Mr Yong-Tae Lee dated 14 August 2012 and in Annexure SA-5 to the witness statement of Dr Seung Ho Ahn. The Court concludes that the whole of these documents are no longer the subject of privilege, privilege having been waived by virtue of the documents’ partial disclosure. During the hearing, the parties requested that they be provided with an opportunity to view the Court’s judgment so as to ensure that no confidential material is disclosed by the Court. The Court will hand down its reasons, but will provide the parties with seven days to make any submissions on any issue of confidentiality that may arise before the judgment is made available to the general public.

Ratio Decidendi

Legal Principle Established

The Court also considers that the decision of Batt JA provides a more realistic and contemporary approach to resolve issues arising under privilege claim, as did Lander J in Prysmian at [26]. It respectfully adopts such test. It is necessary for the Court to determine whether there was a real prospect of the litigation when the subject documents were created in order to justify a claim for privilege.CONSIDERATION The Court will now consider the issues raised by Apple in opposition to Samsung’s claim for privilege.(a) Lack of personal knowledge of content There is no evidence that Mr Kim has any personal knowledge of the contents of many of the documents, nor personal knowledge as to whether it can properly be said that each one of them has been brought into existence at a time when litigation was reasonably contemplated or produced by its author for the dominant purpose of obtaining legal advice or for the conduct of the anticipated litigation. As to his actual involvement in the preparation of Annexure D, Mr Kim deposes at [26]-[28] of his second affidavit:Due to the technical nature of the dispute with Apple, many of the documents created for the purpose of providing legal advice to Samsung’s senior management about the dispute contained input from both lawyers and non-legal staff, in particular from registered patent attorneys but also from other technical analysts and licencing specialists. This is almost always the case where a document contains an evaluation or analysis of the strength of Samsung’s or another party’s patents.The patent analyses to which I refer above at paragraphs 20(d) and 26 above are created by the Technology Analysis Group in IP Center. The head of the Technology Analysis Group is Mr Beyong Ho Yuu, who is a qualified US legal attorney. Mr Yuu supervises a number of Korean patent attorneys and another qualified US legal attorney. Mr Yuu is responsible for the final form of all patent analyses created by the Technology Analysis Group.The patent analyses are prepared for the purposes of Samsung’s in-house counsel advising on the strength of the claims or defences relating to particular patents. The analyses are also used to form the basis of instructions to Samsung’s external counsel for the purposes of obtaining legal advice from them. From time to time I have attended meetings of IP Center executives at which such patent analyses have been discussed. The IP Center executives who have been present at these meetings, include Dr Seung Ho Ahn, Mr Seong-Yoon (Brian) Kim, Mr Beyong Ho Yuu, Mr Kijoong Kang and Mr Jaewan Chi, all of whom are qualified as legal attorneys in one jurisdiction or another. Mr Kim does not state that he has personally inspected the documents to verify his statements claiming privilege. In respect of the documents he did not create, his opinions rely entirely upon statements by other parties of whom he states that he has made inquiries. It is not even clear that the persons of whom he made inquiries themselves have personal knowledge of the purpose for which the documents were created. Mr Kim merely states that his ‘views… are based upon my direct involvement in the dispute’. He also states that he became ‘directly involved in the dispute’ in late 2010 and that ‘from at least that time believed that Apple would sue Samsung for alleged patent infringement and related claims’.