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A recent case involving Apple and Samsung provides a timely
reminder to businesses about the importance of proper document
retention when current or anticipated litigation arises. Georgina
King and Kelly Marshall explain.
DOCUMENT RETENTION IN AUSTRALIA
Australia's legal requirements in relation to document
retention are often met with concern due to uncertainty about
obligations.
Litigation is a key area in which confusion about document
retention obligations can have damaging consequences for companies
and businesses.
The position in Australia is that records which are relevant, or
are reasonably likely to be relevant, to any current or anticipated
future legal proceedings or regulatory investigations must be
retained and produced if required, during the litigation
process.
If there is any doubt as to whether a record is reasonably
likely to be required in any ongoing or potential future legal
proceedings, it should be preserved (See British American
Tobacco Australia Services Limited v McCabe [2002] VSCA 197).
In Victoria, this principle has been codified by statute and
carries with it a maximum of 5 years imprisonment, a fine or both.
Not only can directors and officers be found guilty of this
offence, but so too can a body corporate (See Crimes Act
1958 (Vic)).
US PERSPECTIVE
The recent stoush between Apple and Samsung in the Californian
District Court case Apple Inc v. Samsung Electronics Co Ltd et
al., C 11-1846 provides an example of how businesses easily
fall foul of document retention requirements.
The case involves a claim by Apple of infringement by Samsung of
Apple patents. In the proceedings Apple succeeded in obtaining an
order that the jury be instructed to draw an adverse inference
against Samsung in respect of the destruction by Samsung of emails
deemed to be relevant to the patent infringement claim brought
against it.
In granting the adverse inference order, the Californian
District Court found that Samsung had "consciously
disregarded" its obligations to preserve relevant evidence
because:
after the future litigation had become reasonably foreseeable
and even after the litigation had commenced, Samsung failed to
disable the auto-delete function used in its email system;
Samsung failed to adequately distribute to its employees
'litigation hold' notices requiring them to preserve all
relevant documents;
Samsung initially failed to properly educate its employees
about the requirements for retaining any documents potentially
relevant to Apple's claim; and;
Samsung failed to monitor its employees, at all relevant times,
to ensure that they were complying with the document retention
requirements.
The Californian court's inherent powers include, much like
Australian courts, the ability to appropriately penalise a party
who prejudices its opponent through the destruction of evidence
that the party ought to have reasonably known was relevant
to the litigation. A party that destroys relevant documents can
also be found guilty of contempt of court or perverting the course
of justice. In this instance, the court instructed the jury to
presume that relevant evidence was destroyed and that the lost
evidence was favourable to Apple. Clearly this could have a huge
impact on the outcome of Apple's patent infringement claim
against Samsung.
LESSONS FOR AUSTRALIA
When litigation occurs, or there is a reasonable likelihood of
litigation occurring, a business must immediately take all
necessary steps to ensure that it complies with its obligations to
the court to retain any relevant or potentially relevant
documents.
As the Apple and Samsung drama highlights, this means taking an
active approach to educating and monitoring employees in relation
to retaining relevant documents, suspending any operational
document retention or destruction policy in respect of any
potentially relevant records and almost certainly disabling any
automatic document deletion system that could affect relevant
documents.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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