Samsung Sanctioned by Judge for Apple Document Disclosure

Samsung Electronics Co. (005930), sanctioned with its law firm by a U.S. judge for violating a court order protecting the confidentiality of Apple Inc. (AAPL)’s patent-licensing accords, avoided the severe penalties the iPhone maker sought.

U.S. Magistrate Judge Paul Grewal in San Jose, California, yesterday said that “public findings of wrongdoing” by Samsung’s law firm, Quinn Emanuel Urquhart & Sullivan LLP, and Quinn Emanuel’s payment of Apple and Nokia Oyj’s legal costs would be “sufficient both to remedy Apple and Nokia’s harm and to discourage similar conduct in the future.”

The e-mail disclosure at issue, which Samsung said was accidental, came as the companies were waging their first patent-infringement dispute in federal court in San Jose over technology in smartphones. Apple won the 2012 jury trial and was ultimately awarded damages of $930 million.

The world’s top two smartphone makers have spent hundreds of millions of dollars in legal fees on claims of copying each other’s features in a global battle to dominate the market. Samsung accounted for 28.8 percent of global smartphone shipments in the three months ended Dec. 31, down from 29.1 percent a year earlier, Framingham, Massachusetts-based market researcher IDC said in a Jan. 27 statement. Apple’s share fell to 17.9 percent from 20.9 percent.

‘Highly Confidential’

The sanctions relate to a report Quinn Emanuel sent via e-mail that disclosed Apple’s patent-license agreements with Nokia, including “highly confidential financial terms,” to employees of the Suwon, South Korea-based Samsung who weren’t authorized to see the information, according to court filings.

Apple, based in Cupertino, California, has another case against Samsung going to trial in March over newer smartphone models, including Samsung’s Galaxy S III. The iPhone maker contended that because Samsung’s mishandling of confidential information compromised Apple’s ability to negotiate licenses, jurors should be told at the outset of the trial that the Galaxy maker “engaged in bad faith licensing conduct.”

Grewal said in his order that he found the most severe penalties recommended by Apple -- and a Nokia proposal that Quinn Emanuel be banned for 10 years from representing any company suing the Espoo, Finland-based phone maker -- to be “ludicrously overbroad.”

‘Aggressive Suppositions’

After multiple hearings, “what began as a chorus of loud and certain accusations had died down to aggressive suppositions and inferences, and without anything more, Quinn Emanuel and Samsung cannot reasonably be subject to more punitive sanctions,” Grewal wrote.

Apple’s lawyers described the breach of confidentiality as “massive,” saying the e-mail in question was “sent and resent or forwarded literally scores of times” to as many as 223 people, including 90 Samsung employees who weren’t authorized to see it, and 130 outside lawyers at 19 different law firms, some of which are litigating against Apple in different cases.

“This knowledge gives them a clear advantage in their license negotiations against Apple and others, and they cannot realistically be expected to ’forget’ those terms,” Apple said.

‘Inadvertent’ Disclosure

John Quinn, a lawyer representing Samsung, told Grewal at a Dec. 9 hearing that Apple exaggerated the importance of the “inadvertent” disclosure and the harm it has caused. The law firm has spent “millions of dollars” investigating the depth and breadth of the disclosure, he told the judge.

Between Apple and Nokia’s requests, “they have asked for every kind of sanction under the sun,” he said.

Quinn said in a statement today that Grewal’s ruling “should put an end to the unsupported accusations that fueled this inquiry.”

“We are pleased that Judge Grewal concluded that nothing done by either Quinn Emanuel or Samsung ‘ultimately implicated any issue in this or any other litigation or negotiation,’” he said.

Adam Yates, a Samsung spokesman, and Apple spokeswoman Kristin Huguet declined to comment on the sanctions order.

The first case is Apple Inc. v. Samsung Electronics Co. Ltd., 11-cv-1846, and the second case is Apple Inc. v. Samsung Electronics Co., 12-cv-630, 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

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