The Apple v. Samsung case in the U.S. District Court for the Northern District of California is poised to become the intellectual property equivalent of the O.J. Simpson trial, as it is easily one of most widely followed IP dispute in years. The intense media coverage has brought an important issue to the forefront — namely, how to handle sensitive information that is bound to be included in this type of dispute.
Apple is famously secretive, having gone so far as to build an offsite, employees-only-restaurant so competitors could not eavesdrop on its employees. As a result, one of the issues that has received the most attention is the degree to which some of Apple’s trade secrets have been disclosed at trial. Apple’s experience provides a number of lessons to companies about the challenges of protecting trade secrets in open court, especially in a high profile case.
On Saturday, The Wall Street Journal ran an article, “Apple’s Secrets Revealed at Trial,” that was its most popular online article over the weekend. The article detailed, for example, the testimony of Phil Schiller, Apple’s senior VP of world-wide marketing, who revealed how much Apple spends on marketing the devices at issue. Schiller testified that Apple had spent $647 million advertising the iPhone in the U.S., from its release in 2007 through its fiscal year 2011. For the iPad, which was first sold in 2010, he estimated $457.2 was spent.
Some of the trade secrets disclosed ran counter to Apple’s professed marketing and business strategy. For example, The Journal described the testimony of Scott Forstall, a senior VP who oversees the software for Apple’s mobile devices, who was forced to admit that as early as January 2011, an Apple executive advocated that Apple build a tablet with a 7-inch screen. (Apple has generally disputed the appeal of devices smaller than its 9.7-inch iPad, although The Journal says there are reports that Apple is developing a smaller model). According to The Journal, Forstall described “locking down” one floor of Apple’s buildings with cameras and keycard readers to strengthen security and he admitted that Apple employees put a sign up on the front door with the words Fight Club written on it, referring to the hit movie in which characters are told that the first rule of Fight Club is not to talk about Fight Club. (For more, check out The New York Times article, “At Its Trial, Apple Spills Some Trade Secrets.”)
Apple has won some and lost some trade secret battles in the case. It tried to limit the admissibility of a marketing survey of its customers, arguing that parts of it were a trade secret, but U.S. District Court Judge Lucy Koh disagreed. In addition, Apple has attempted, with mixed success, to seal sales documents that Samsung wished to use in cross-examination. Indeed, the issue of Apple’s trade secrets has long been a pressure point in this case, as Samsung unsuccessfully sought other trade secrets of Apple in a discovery dispute last year.
The trial has also involved the possible disclosure of trade secrets of third parties. Intel and Qualcomm have both filed motions to protect information contained in their licensing agreements and have battled with Reuters over the degree of disclosure that should be provided to the media. This of course places additional pressures on Apple, as important customer or vendor relationships may be frayed as they are drawn into the litigation.
What are the lessons for a business trying to protect its trade secrets in open court? The Apple v. Samsung dispute highlights a number of important challenges in any trial, but especially in a trade secrets trial. Here are some facts every company needs to face:
1. Accept that the standard is against you. Courts, especially federal courts, are generally reluctant to seal the court room and very sensitive to the need for open proceedings. However, simply because a company seeks to protect its trade secrets does not mean it has to disclose the very trade secrets it seeks to protect, let alone other trade secrets. For an excellent analysis of the balancing that every court should apply, see Knoxville U.S. Magistrate Clifford Shirley’s opinion in U.S. v. Roberts, a high profile criminal case that involved the theft of Goodyear’s trade secrets.
2. Be prepared to battle the media. In a high profile case, this is almost a certainty. As newspaper budgets have shrunk, a high profile trial is fertile ground for local or national coverage. However, even efforts to seal what your client might think is a low profile dispute may raise the media’s ire and provoke a battle over a protective order. Consequently, have a brief ready to go that anticipates the First Amendment issues and the need to protect trade secrecy.
3. Choose Your Battles Wisely. Given the realities outlined above, don’t squander your credibility and resources fighting over lower level trade secrets or confidential information. Know what trade secrets are truly important and be prepared to battle over them as they arise in the case. Also, insist on an order that any confidential documents will be presented to the court first before the opposing party tries to use them in open court so that you are not closing the proverbial barn door after the horse has escaped.