Importance of Legal Hold Highlighted in Apple v. Samsung

The blockbuster jury award issued in the ongoing and high-profile patent litigation between Apple and Samsung has certainly caught everyone’s attention. The jury concluded that Samsung infringed on several Apple patents and awarded Apple $1.05 billion in damages.

As companies try to make sense of the verdict, it is important to note some of the less publicized but still important aspects of the trial. One important lesson companies involved in patent litigation can take away from the case is the importance of a litigation hold and the consequences of failing to uphold your obligations.

Whenever a person or company is involved in litigation or has notice that it is likely to be involved in litigation the law imposes an obligation—called a “legal hold”—to preserve evidence that might be relevant for use at an eventual trial or during the discovery phase of the case. The evidence that needs to be preserved includes any kind of physical evidence, such as documents, electronic data, physical objects, etc. For example, if the design of a product is relevant, then drawings, contracts, manuals, photographs, samples, prototypes, and any other documents or things that relate to the design of the product would be potentially relevant. It is important to recognize that electronic data is included in the “legal hold.” This includes email communications and all other electronic data that might be relevant.

If a party to a lawsuit fails to hold onto the evidence, the judge can order that an “adverse inference” be made against the party in the case.  So for example, a jury could be instructed that because the party failed to preserve evidence the jury could infer that the evidence would help prove the other side of the case. This is what happened to Samsung in its recent patent litigation with Apple. While it may not have directly impacted the verdict, it certainly did not help their case either.

Companies have had this happen to them when, for example, they neglected to disable an automatic deletion program of emails after a specific period of time.  Even though nobody sorted through the emails before they were automatically deleted, the judge ordered that the absence of the emails could be used against the party. Possibly there were no emails that actually had any negative information or evidence, but the party that failed to preserve the emails would have an adverse inference taken against it anyway.

The lesson is this: a party to a lawsuit has a legal obligation to take all reasonably necessary steps to preserve potential evidence, including emails, for as long as the lawsuit might last, and this obligation begins before the lawsuit is filed, i.e., as soon as the party has reasonable notice that a lawsuit is likely. Anyone in the company that has potentially relevant evidence is subject to this “legal hold.” The company has the obligation to advise all relevant employees to preserve emails and other evidence, and to monitor compliance to make sure that they follow through with the “legal hold.”

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