Apple Jury to Learn of Samsung Document Destruction - Businessweek

Apple Inc. (AAPL) (AAPL) won court permission to tell a jury that Samsung Electronics Co. (005930) destroyed e-mail that the iPhone maker wanted to use as evidence in a patent trial set to begin July 30.

U.S. Magistrate Judge Paul Grewal in San Jose, California, yesterday agreed with Apple that jurors should be told that they can draw an “adverse inference” from Samsung’s failure to avoid auto-deleting e-mail Apple later sought as evidence. The jury instruction is a “modest” method of correcting for any harm suffered by Apple and deterring Samsung’s practices in the future, Grewal wrote

“In effect, Samsung kept the shredder on long after it should have known about this litigation,” Grewal wrote. The judge said the “rolling basis” Samsung used for deletions resulted in a similar ruling against the company in case filed in 2004.

Apple, based in Cupertino, California, and Suwon, South Korea-based Samsung, the world’s two biggest makers of high-end mobile phones, accuse each other of copying designs and technology for mobile devices. The companies are fighting patent battles on four continents to retain their dominance in the $219 billion global smartphone market.

Possible witnesses at the trial include Apple senior executives Scott Forstall and Phil Schiller, according to a witness list provided by Apple. Forstall is the senior vice president in charge of the software that runs on Apple’s iPhone and iPad. Schiller is the senior executive in charge of marketing.

Samsung Appealing

Samsung will appeal the ruling to U.S. District Judge Lucy Koh, who is overseeing the trial, and if necessary, to a federal appeals court, said Adam Yates, a spokesman for the company, in an e-mailed statement.

Apple’s document destruction claims were rejected in May by International Trade Commission Judge Thomas Pender, Yates said in his e-mail. Pender ruled Samsung took “reasonable and appropriate steps to preserve evidence” and that Samsung’s document retention policy complied with federal law, Yates said.

Apple seeks damages totaling $2.53 billion in the case, according to a court filing yesterday. Apple “conservatively estimates” Samsung’s infringement has cost the company $500 million in lost profit and more than $25 million in royalty damages, according to a court filing.

Unjust Enrichment

The remainder of the total comprises Apple’s unjust enrichment claims, a figure that’s blocked out in the court filing. Apple said that after trial it will seek a permanent ban on sales of Samsung products found by the jury to infringe its inventions.

Grewal concluded in yesterday’s order that “Samsung has failed to prevent the destruction of relevant evidence for Apple’s use in this litigation” and that Apple proved “the lost evidence was favorable to Apple.”

He proposed that jurors be told they must determine for themselves whether to make the evidence destruction a factor in their verdict.

“You may choose to find it determinative, somewhat determinative, or not at all determinative in reaching your verdict,” according to the instructions for the jury.

Adam Yates, a spokesman for Samsung, didn’t immediately respond to an e-mail seeking comment on yesterday’s ruling.

Separately, in a filing today, Samsung sought a court order prohibiting Apple from telling jurors that it improperly avoided paying U.S. taxes.

‘Highly Prejudicial’

The suggestion is “not only highly prejudicial and inflammatory, but dead wrong,” Samsung said in the filing.

Samsung also sought an order prohibiting Apple from presenting evidence of Samsung’s total revenue, profits and wealth, saying such evidence would only be used to show the South Korean company can afford to pay “a very large damage award.”

Apple claimed in another filing yesterday before Grewal issued his order, that Samsung is demanding an “unfair, unreasonable, and discriminatory” 2.4 percent royalty on the sales price of Apple products that Samsung claims use its technology.

Samsung “has never sought or received” the 2.4 percent royalty “from any licensee, and indeed cannot even explain where that number came from,” Apple argues in the filing. “Samsung’s royalty demands are multiple times more than Apple has paid any other patentees for licenses to their declared- essential patent portfolios.”

Samsung’s Technology

Samsung countered in its own filing that long before Apple announced the release of any of its products using Samsung’s technology, Samsung offered a “fair and reasonable” royalty rate on its patents to “virtually every major player in the mobile phone industry,” including Apple.

Samsung’s offer is “consistent with the royalty rates other companies charge for use of their standards-essential patents,” Samsung said in its filing. Apple “simply rejected Samsung’s opening offer, refused to negotiate further and to this day has not paid Samsung a dime for Apple’s use of Samsung‘s standards-essential technology.”

The case is Apple Inc. v. Samsung Electronics Co. Ltd., 11- cv-1846, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net