FEDERAL COURT OF AUSTRALIA

Apple Inc. v Samsung Electronics Co. Limited (No 2) [2012] FCA 1358

THE COURT ORDERS THAT:

1.    Order 2 of the orders made by Cowdroy J on 30 November 2012 be vacated.

THE COURT NOTES THAT:

2.    The confidentiality regime agreed to by the parties remains in existence between the parties.

REASONS FOR JUDGMENT

1    By their amended interlocutory application filed on 7 September 2012, the applicants/cross-respondents (‘Apple’) seek further and better discovery from the respondents/cross-claimants (‘Samsung’) in respect of certain categories of documents. The claim arises from the following facts.

2    On 30 November 2012 the Court made orders arising from its decision in this matter. The Court ordered that:

1. Unredacted copies of the documents annexed as Annexure YTL-2 and YTL-3 to the witness statement of Mr Yong-Tae Lee dated 14 August 2012 and an unredacted copy of the document annexed as Annexure SA-5 to the witness statement of Dr Seungho Ahn dated 10 August 2012 be provided by the Respondents/Cross-Claimants (Samsung) to the Applicants/Cross-Respondents (Apple) within 14 days of this date.

2. The proceedings be adjourned for seven days for the purpose of making any orders as may be required by the parties.

3    Order 2 of 30 November 2012 was intended to provide parties with an opportunity to review the judgment to consider whether any portion of the judgment should be amended pursuant to s 50 of the Federal Court Act 1976 (Cth). Pursuant to such orders, the parties applied to the Court for amendment of the draft reasons. These reasons have therefore been amended from the version which was given to the parties on 30 November 2012.

BACKGROUND

4    The principal proceedings between the parties involve both a claim by Apple against Samsung, and a cross-claim by Samsung against Apple. Similar claims have been commenced in several other countries. The proceedings were commenced by Apple on 29 July 2011. In a cross claim filed in this Court on 16 September 2011, Samsung claims Apple has used patents concerned with technology used in electronic equipment known as baseband chip sets without authorisation from Samsung. The equipment enables connectivity between electronic devices such as a mobile telephone or a tablet computer and allows these devices to communicate with a base station. Pursuant to the requirements of an international organisation known as the European Telecommunications Standards Institute (‘ETSI’) such patents are required to be licensed for use by mobile handset makers, because the patents are essential for the implementation of mobile telecommunication standards known as the 3GPP Universal Mobile Telecommunication Standards (‘UMTS’). Such standards must be incorporated in mobile handsets to enable them to operate on the UMTS 3G mobile networks, which are used extensively throughout Australia and the world. The Court has been informed that Samsung has declared to ETSI that it will license the use of technology the subject of such patents on fair, reasonable and non-discriminatory (‘FRAND’) terms.

5    Samsung alleges that it holds patents in respect of the base band chip sets. In its cross-claim, Samsung seeks declarations of infringements of its patents. It also states that it is willing to license the patents, but that it has not yet reached an agreement with Apple upon the terms of such license. Apple denies patent infringement and claims that the patents are invalid on several grounds. Apple also alleges that Samsung is engaged in anticompetitive conduct contrary to provisions of the Competition and Consumer Act 2010 (Cth) by refusing to licence the patents to Apple and thereby preventing it from selling three of its products, namely the iPhone 4, iPhone 4S and iPad 2. Apple further claims that an attempt by Samsung to give effect to an anticompetitive condition from its agreement between itself and a component supplier to Apple, namely Qualcomm (‘the Qualcomm agreement’), also constitutes a breach of that Act.

6    As a consequence the issues arising in the principal proceedings will concern, amongst other things, Samsung’s purpose or strategy in engaging in the conduct complained of; whether Samsung was genuine in its attempts to reach agreement on FRAND terms with Apple, and why Samsung took steps to give effect to the Qualcomm agreement.

CLAIMS FOR FURTHER DISCOVERY

7    On 19 October 2011 Apple served a notice to produce upon Samsung requiring it to produce 13 different categories of documents. In response documents were produced on several dates between 21 October 2011 and 16 December 2011.

8    On 28 November 2011 Apple served a further notice to produce on Samsung requiring production of 79 separate categories of documents. On 27 January 2012 Apple filed an interlocutory application seeking discovery of 36 categories of documents.

9    On 8 February 2012 court orders were made requiring documents, as agreed or ordered, to be produced by Samsung by 30 March 2012, but not by way of formal discovery. The categories were resolved between the parties and court orders requiring production were made on 16 March 2012. By orders dated 4 April 2012, the production date was extended to 30 March 2012.

10    On 18 April 2012 Samsung informed Apple that it had completed its production in accordance with the orders of 16 March 2012. However, from time to time from 18 April until 14 August 2012 Samsung, in accordance with its discovery obligations, produced additional documents, apparently as it prepared its evidence in response to Apple’s amended statement of cross-claim which had been served on 29 February 2012. Samsung has produced a substantial volume of documents to Apple in response to the Court’s orders made on 8 February and 16 March 2012 and in response to the earlier requests extending from 19 October 2011.

11    On 24 May 2012 Apple notified Samsung of its concern in relation to the adequacy of discovery. Samsung responded in letters dated 1 June 2012 and 9 June 2012. On 3 July 2012 an affidavit (‘Kim’s first affidavit’) was affirmed by Mr Jae-Hwan Kim (‘Mr Kim’), a senior legal counsel for Samsung. The affidavit attests to the detailing and verifying of Samsung’s discovery and its claim for privilege.

12    On 9 July 2012 Apple served an amended application for further and better discovery and indicated that it wished to cross-examine Mr Kim on his affidavit. On 2 August 2012 Apple informed the Court that the proceedings were likely to be relisted for the purpose of resolving the outstanding discovery issues between the parties.

13    On 18 September 2012 Mr Kim swore a further affidavit (‘the second Kim affidavit’). Relevantly, one of the annexures to such affidavit is Annexure B which lists documents, being legal advice or communications, in respect of which privilege is claimed. Apple claims that portions of certain documents in this annexure have now been attached to witness statements and consequently privilege has been waived with regard to those documents, associated documents referred to therein, and in other documents contained in another schedule to the second Kim affidavit known as ‘Annexure D’, which is an amended version of a schedule contained in a previous affidavit of Mr Kim.

14    Annexure D itemises each Korean language document for which privilege is claimed and provides, inter alia, a description of the document and the reason for the privilege claim. The documents in Annexure D form the bulk of the present claim by Apple for further and better discovery on the basis that the claim for legal professional privilege by Samsung has not been established.

15    In support of its application Apple relies upon an affidavit of Ms Sue Maree Gilchrist affirmed on 10 September 2012. Samsung relies upon an affidavit of Mr Rossano Zaurrini and the second Kim affidavit. Mr Kim’s first affidavit is incorporated as an annexure to Ms Gilchrist’s affidavit.

16    The issues for determination are whether the claim for privilege made in respect of the documents listed in Annexure D to the second Kim affidavit is established and whether legal professional privilege has been waived over certain identified documents contained in Annexure B to the second Kim affidavit, and related documents.

17    The parties’ written submissions also advert to a more general issue as to whether Samsung had provided inadequate discovery to Apple. However, this issue was deferred to be heard at a later time to the issues regarding privilege and waiver of documents.

BASIS FOR PRIVILEGE CLAIM

18    Samsung claims privilege over the documents in Annexure D to the second Kim affidavit on the basis that the documents were either prepared in Samsung’s IP Centre; or are Korean language advices provided by external law firms; or comprise legal advice from the IP Legal Team to the IP Centre; or comprise documents prepared by the Technology Analyses Team for the purpose of Samsung’s IP Centre lawyers and for the purpose of providing legal advice to senior management for use in litigation.

19    In his first affidavit Mr Kim states that he is a senior legal counsel in the Intellectual Property Legal Team, which is part of Samsung’s IP Centre, and that he is a member of the State Bar of California and is admitted to practise in that jurisdiction. He joined Samsung in 2010 having practised as an attorney in a legal practice, specialising in intellectual property litigation. His affidavit states that Samsung operates a global electronics business with over 175,000 employees, including 42,000 employees engaged in research and development. Those employees ‘generate an enormous amount of data, especially in the form of emails and attachment to emails’. Mr Kim states that he is advised by Ashurst, Australian solicitors for Samsung, that over 3,000 documents relevant to the patent and non-patent issues in the proceedings have been discovered.

20    With respect to the claim for privilege Mr Kim states, inter alia:

I note that many of the privilege claims relate to documents created by officers of IP Centre. IP Centre is a department which has been set up to function as an internal law firm for SEC and its foreign subsidiaries in respect of contentious and non-contentious intellectual property matters. IP Centre:

(oo)    acts for SEC and its subsidiaries in the conduct of legal proceedings both in Korea and abroad, including by engaging and instructing external lawyers;

(pp)    advises SEC’s business divisions in connection with licensing matters (such as the interpretation of contacts and SEC’s rights arising out of contracts or proposed contracts);

(qq)    advises SEC’s business divisions in relation to SEC’s patent rights – in the latter case such advice might be called for prior to licensing negotiations or in the context of litigation.

21    Mr Kim deposes that the IP Centre ‘is staffed by lawyers who are usually legal practitioners, although not all of them maintain current practising certificates’. Mr Kim also refers to the fact that his immediate superior, Mr Seong-Yoon (Brian) Kim, is a former partner of an American law firm and that he reports to Mr Kijoong Kang, a retired judge; and that the ‘head of the IP Center, Dr Seung Ho Ahn, is admitted to practice in California’.

22    Mr Kim continues:

Due to the technical subject matter the lawyers are called upon to deal with, IP Centre also employs non-lawyers with specialist technical abilities, namely patent attorneys, technical analysts and licensing specialists. These officers provide assistance to the lawyers in respect of technical matters to enable the lawyers to discharge their functions. For example, a lawyer called upon to advise in relations to the likely success of a claim based upon a patent might instruct a patent attorney to provide an initial analysis of the strength of the patent, the existence of prior art and so on.

23    In Mr Kim’s first affidavit he affirms in the final paragraph that he is satisfied that the descriptions of the documents referred to in them and the descriptions of the basis for the privilege claim in relation to each of them are accurate, based on his instructions to Ashurst (solicitors for Samsung), his understanding of the work undertaken by Ashurst to check the claims for legal professional privilege and his review of letters sent by Ashurst to Freehills (solicitors for Apple).

24    Mr Kim’s second affidavit contained the following explanation of Annexure D (as amended):

The documents contained in the amended “Annexure D” privilege list are principally internal Samsung communications and documents concerning Samsung’s dispute with Apple which were created after Apple threatened litigation against Samsung, and for the greater part after Apple commenced that litigation on 15 April 2011. I did not myself create or request the creation of all of the documents, which have numerous authors. Aside from specific information which I identify below, my views as to the purposes of them being created are based on my direct involvement in the dispute between Samsung and Apple (and in that regard my involvement in the creation of similar privileged documents to which I refer at paragraph 25 below) and on enquiries I have made of my colleagues involved in the global litigation with Apple. These documents have been created for the purpose of:

(a)    providing legal advice to Samsung’s senior management, including in relation to the litigation with Apple;

(b)    briefing in-house and external lawyers in relation to the litigation; or

(c)    use in the litigation.

25    In [22] of that affidavit, Mr Kim states:

The documents in the amended “Annexure D” privilege list are in the form of reports, plans, summaries, lists, tales, agenda, meeting minutes and working papers. The vast majority of the documents are expressly marked “Confidential and Privileged Attorney Client Communication and Attorney Work Product”, “Confidential and Privileged Attorney-Client Communications”, “Privileged & Confidential Attorney-Client Communication” or words to that or similar effect.

26    At [24] Mr Kim states:

All of the documents in the amended “Annexure D” privilege list were created within or received by IP Center by its staff in performing its role in the manner and for the reasons set out in paragraphs 47 to 50 of my first affidavit. Many of these documents are marked “IP Center”.

27    Mr Kim states at [30]:

Due to the global nature of the litigation with Apple, Samsung has retained external law firms in each jurisdiction where there is litigation with Apple. Each of these law firms provides advice in relation to the litigation in its respective jurisdiction. Many of the documents in the amended “Annexure D” privilege list were created for the purpose of IP Center communicating to Samsung’s senior management advice provided by Samsung's external law firms.

28    Mr Kim further deposes that certain documents are itemised in Annexure D; including notes prepared by Mr Jaehyoung Kim for the purposes of meetings with Mr Thomas Pease, a partner in the firm of Quinn Emanuel (which is Samsung’s United States attorney); reports of such meetings; advices received from Quinn Emanuel; and minutes of a meeting held in Korea concerning global litigation between Samsung and Apple, which was attended by Samsung’s external lawyers.

SUBMISSIONS

29    Apple submits that there is no evidence that Mr Kim has satisfied himself personally that the claimed privilege documents were in fact created for the dominant purpose of litigation. Apple further submits that the fact that the documents may have been created in the IP Centre does not indicate that they were in fact created for such purpose and that there is no evidence from which one could assess the dominant purpose of particular documents. Apple submits that there is insufficient evidence about the documents to establish who gave the advice, to whom, and for what purpose. Apple further submits that since Mr Kim is an in-house lawyer his statements do not carry sufficient weight to establish privilege because of his commercial loyalty to his employer, Samsung.

30    Apple also submits that subsequent discovery of documents suggests that the claim for privilege cannot be justified. In particular, Apple points to documents in respect of which Samsung had previously claimed privilege but had subsequently disclosed. Inspection of those documents suggested that they were never properly the subject of any privilege claim. Apple claims that the selective disclosure of documents after privilege was claimed suggests that in fact Samsung is carefully using certain documents to its advantage, while improperly claiming privilege over others it does not want to disclose. Finally, Apple submits that the mere fact that documents were prepared in Samsung’s IP Centre is insufficient to maintain privilege.

31    Samsung responds by pointing out that 3,000 documents were produced on a rolling basis informally and that ongoing discovery had taken place in numerous exchanges between the parties. Samsung emphasises that of the 154 documents claimed to be privileged, 128 thereof were created after the commencement of this litigation on 15 April 2011. Most of the remaining documents on the claimed list were created shortly prior to that time, after litigation was reasonably anticipated. Samsung maintains litigation was reasonably anticipated from July 2010.

32    Samsung submits that it is immaterial that Mr Kim was not the author of most of the documents. Samsung submits that it is not necessary for the party claiming privilege to adduce evidence from each author of a document and that such process would be unduly cumbersome: see Re Southland Coal Pty Ltd (2006) 203 FLR 1 at [30]. Samsung submits that Mr Kim’s second affidavit establishes that he was directly involved in the creation of some of the documents and made inquiries of some of his colleagues in relation to the others. Further, Mr Kim reviewed all the documents and has described them in detail. In regard to Annexure D attached to his second affidavit, Mr Kim has prepared and provided detailed evidence directly relating to the updated version of that document, the earlier version of Annexure D being annexed to his first affidavit. Samsung also emphasises that Apple does not dispute that documents contained in Annexure D contained legal advice or were prepared for the purpose of giving legal advice.

33    Additionally Samsung points out that the documents were prepared in the IP Centre. The function of the IP Centre is to formulate and advise on litigation strategy; to instruct external lawyers to implement that strategy and to report on progress of litigation and on any advice received from the external lawyers. Therefore, the documents should be privileged.

34    Samsung has proposed that the Court should inspect the documents if necessary for it to determine for itself whether the documents are properly privileged. Samsung refers the Court to decisions in Australian Competition and Consumer Commission v Prysmian Cavi e Sistemi Energia SRL (No 2) (2012) 287 ALR 760 (‘Prysmian’) and Kirby v Centro Properties Ltd (No 2) (2012) 87 ACSR 229, in which the Court recognised such practice.

35    In reply Apple submits that the evidence in support of the claim for privilege is inadequate; and that the facts in Prysmian are quite distinct from those in the present circumstances, since those proceedings involved a prosecution, and gave rise to different considerations. In the present matter, the documents may have been prepared for a commercial, not legal purpose. Apple reiterates that Mr Kim has been involved in the ‘contribution’ of seven documents only and that he had personal involvement with respect to a limited number of documents. In this circumstance, Apple submits that the Court could not be satisfied that the dominant purpose for the creation of the documents was for the ligation. The generalised descriptions in the schedules did not satisfy the Court of the true purpose of the documents.

LEGAL PRINCIPLES: PRIVILEGE

36    The onus of establishing the entitlement to claim privilege rests upon the claimant: see National Crime Authority v S (1991) 29 FCR 203 at 211 per Keeley, Lockhart and Heerey JJ. The claimant must establish that the dominant purpose of the document was related to litigation which, at the time the document was produced, was reasonably contemplated: see Nickmar Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 44 at 54; Trade Practices Commission v Sterling (1979) 36 FLR 244; Wheeler v Le Marchant (1881) 17 ChD 675.

37    In relation to the ‘dominant purpose’ test, Barwick CJ stated in Grant v Downs at 677:

Having considered the decisions, the writings and the various aspects of the public interest which claim attention, I have come to the conclusion that the Court should state the relevant principle as follows: a document which was produced or brought into existence either with the dominant purpose of its author, or of the person or authority under whose direction, whether particular or general, it was produced or brought into existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation, at the time of its production in reasonable prospect, should be privileged and excluded from inspection.

38    This test was affirmed by the High Court in Esso Australia Resources Limited v Federal Commissioner of Taxation (1999) 201 CLR 49; see also AWB Limited v Cole and Anor (2006) 152 FCR 382 at 411 and has been applied in numerous other decisions. See also the consideration of the principles referred to by Young J in AWB Ltd v Cole and Anor (No 5) (2006) 155 FCR 30 at 44 where his Honour stated the principles concerning a claim for privilege. In Barnes v Commissioner for Taxation (2007) 242 ALR 601 the Full Court confirmed at [8] that:

The test for privilege remains whether the dominant purpose of the creation of a document was for the provision of legal advice: see DSE (Holdings) Pty Ltd v InterTAN Inc (2003) 135 FCR 151; [2003] FCA 1191; Three Rivers District Council v Governor and Company of the Bank of England (No 6) [2005] 1 AC 610; [2005] 4 All ER 948.

39    Significantly, at [8] the Full Court observed:

If the advice given by a legal adviser is predominately for a financial, personal or commercial purpose, as opposed to a purpose of seeking legal services or assistance, it will not be protected: Three Rivers District Council.

40    As for the ‘reasonable contemplation’ aspect of the test, objective considerations apply. This Court stated in Ensham Resources Pty Limited v AIOI Insurance Company Limited [2012] FCA 710 (‘Ensham’) at [18]:

The question of whether litigation is reasonably contemplated is an objective one: Nickmar at 55, Grant v Downs (1976) 135 CLR 676 at 682-683. As Goldberg J stated in Australian Competition and Consumer Commission v Australian Safeway Stores (1998) 81 FCR 526 (‘Australian Safeway’) at 558:

Whether proceedings are anticipated must be determined by reference to objective criteria and not simply by reference to the subjective statements of a participant in the relevant information gathering or litigation preparing process. A document or communication cannot be given protection from production by the creator of the document or the person propounding it in the form of a communication uttering the litany – I brought it into existence for the purpose (be it sole or otherwise) of legal proceedings. Nor is it sufficient, in my view, for the person to say – I anticipated proceedings would be brought at the time I brought the document into existence and the purpose for which I did so was those proceedings.

41    In Australian Safeway at 559 Goldberg J stated in determining whether litigation was reasonably contemplated, the following test is applicable:

Where the legal proceedings are anticipated one needs more than speculation as to the possibility of such proceedings; one needs a probability or likelihood that such proceedings will commence. It is putting it too highly, in my view to say that a decision must have been made by the moving party or authority that such proceedings will be commenced. It is sufficient in my view, that the moving party or authority has made a decision, for example, that subject to being satisfied as to the strength of the case, anticipated on the facts as known, that legal proceedings are likely. The concept of anticipated proceedings involves the notion that there is a reasonable probability or likelihood that such proceedings will be commenced – not that they will be but rather more probably than not they will be.

42    As was observed in Ensham at [20] there has been disagreement with Goldberg J’s test: see Mitsubishi Electric Pty Ltd v Victorian Work Cover Authority (2002) 4 VR 332 at 341, where Batt JA considered that the more appropriate test for determining whether litigation was reasonably anticipated was whether there was a real prospect of it. Batt JA said at [22]:

Reviewing the circumstances objectively, I am of opinion, for the reasons which follow, that at the time the reports were commissioned litigation was reasonably anticipated or in contemplation: there was a real prospect of it.

43    In Prysmian, Lander J at [25]-[27] observed that such test had been followed by Jacobson J:

The test propounded by Batt JA has been followed by Jacobson J in Microsoft Corporation v Ben Zhong Fan [2003] FCA 1026 at [73]–[75], Allsop J in Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] FCA 503 at [8], McDougall J in Singapore Airlines v Sydney Airports Corporation [2004] NSWSC 380 at [43]–[49], and more recently by Perram J in Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 2) at [23].

I think I should follow the decision of the Victorian Court of Appeal for two reasons. First, it is a decision of a Court of Appeal and deserves the recognition that the comments of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 at [135] (citing Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 492) demand. Secondly, it has been followed by three judges of this Court and a judge of the Supreme Court of New South Wales at first instance.

I shall therefore proceed on the basis that the appropriate test is as stated by Batt JA.

44    The Court also considers that the decision of Batt JA provides a more realistic and contemporary approach to resolve issues arising under privilege claim, as did Lander J in Prysmian at [26]. It respectfully adopts such test. It is necessary for the Court to determine whether there was a real prospect of the litigation when the subject documents were created in order to justify a claim for privilege.

CONSIDERATION

45    The Court will now consider the issues raised by Apple in opposition to Samsung’s claim for privilege.

(a) Lack of personal knowledge of content

46    There is no evidence that Mr Kim has any personal knowledge of the contents of many of the documents, nor personal knowledge as to whether it can properly be said that each one of them has been brought into existence at a time when litigation was reasonably contemplated or produced by its author for the dominant purpose of obtaining legal advice or for the conduct of the anticipated litigation.

47    As to his actual involvement in the preparation of Annexure D, Mr Kim deposes at [26]-[28] of his second affidavit:

Due to the technical nature of the dispute with Apple, many of the documents created for the purpose of providing legal advice to Samsung’s senior management about the dispute contained input from both lawyers and non-legal staff, in particular from registered patent attorneys but also from other technical analysts and licencing specialists. This is almost always the case where a document contains an evaluation or analysis of the strength of Samsung’s or another party’s patents.

The patent analyses to which I refer above at paragraphs 20(d) and 26 above are created by the Technology Analysis Group in IP Center. The head of the Technology Analysis Group is Mr Beyong Ho Yuu, who is a qualified US legal attorney. Mr Yuu supervises a number of Korean patent attorneys and another qualified US legal attorney. Mr Yuu is responsible for the final form of all patent analyses created by the Technology Analysis Group.

The patent analyses are prepared for the purposes of Samsung’s in-house counsel advising on the strength of the claims or defences relating to particular patents. The analyses are also used to form the basis of instructions to Samsung’s external counsel for the purposes of obtaining legal advice from them. From time to time I have attended meetings of IP Center executives at which such patent analyses have been discussed. The IP Center executives who have been present at these meetings, include Dr Seung Ho Ahn, Mr Seong-Yoon (Brian) Kim, Mr Beyong Ho Yuu, Mr Kijoong Kang and Mr Jaewan Chi, all of whom are qualified as legal attorneys in one jurisdiction or another.

48    Mr Kim does not state that he has personally inspected the documents to verify his statements claiming privilege. In respect of the documents he did not create, his opinions rely entirely upon statements by other parties of whom he states that he has made inquiries. It is not even clear that the persons of whom he made inquiries themselves have personal knowledge of the purpose for which the documents were created. Mr Kim merely states that his ‘views… are based upon my direct involvement in the dispute’. He also states that he became ‘directly involved in the dispute’ in late 2010 and that ‘from at least that time believed that Apple would sue Samsung for alleged patent infringement and related claims’.

49    In Barnes v Commissioner of Taxation the Full Court said in respect of a claim for privilege made by one of the parties to the litigation at [16]:

This affidavit falls far short of providing any adequate basis for claiming privilege in respect of any individual document. It consists of assertions, conclusions and generalised comments. The documents referred to are from a number of sources. The Further and Better Particulars of Statement of Claim furnished by the appellants refer to several different persons or entities who are said to have been originators of the documents. However, no evidence has been adduced from any of those persons. Most notable of all is the absence of any evidence from Mr Calder [the deponent’s solicitor].

50    The Court noted that the deponent’s solicitor had not sworn an affidavit to verify the claim for privilege and at [16] the Court continued:

In this context, the fact that Mr Barnes’ affidavit does not clarify the reason why any specific document came into existence means that the Court is left to consider the documents on their face and determine as best it can whether the documents are privileged. This is unsatisfactory.

51    The Full Court concluded at [19]:

In the light of these principles it is clear that the evidence provided by the appellants is manifestly insufficient and does not establish any basis for their claim of privilege.

52    The affidavits of Mr Kim relied upon by Samsung suffer from a similar defect. The statements made by Mr Kim are made based upon assertions by others. There is no detailed evidence from some person within the IP Centre to attempt to explain why each document was brought into existence and how it could be said that its dominant purpose was related to reasonable anticipation of litigation. It may well prove to be the case that some, if not all the documents, do satisfy this category but the evidence is inadequate.

53    As already referred to, a party seeking to establish privilege bears the onus of establishing it. To satisfy such onus, sufficient detail must be provided to enable the Court to reach a conclusion concerning privilege. In Kennedy v Wallace and Others (2004) 142 FCR 185, Black CJ and Emmett J said, inter alia, at [13]:

… it is not sufficient for a party merely to assert a claim for privilege nor will an affidavit asserting the purpose for which a document was brought into existence followed by a statement about the category of legal professional privilege to which the document is said to belong necessarily be sufficient.

54    The Court is left in the same position as that referred to by Tamberlin J in Seven Network Limited and Anor v News Limited and Ors [2005] FCA 142 (‘Seven Network’) where his Honour said, inter alia, at [32]:

In my view, this explanation is unsatisfactory in circumstances where the Court is faced with a specific challenge to the claim for privilege and must determine the dominant purpose for which the documents came into existence. Accurate, adequate and reliable discovery is essential to the proper working of the adversary system and the just resolution of disputes before the Courts.

55    At present the Court is left to speculate whether privilege might exist in documents contained in Annexure D, and in this respect the evidence of Mr Kim is unsatisfactory. This is a matter for the Court’s consideration.

(b) Generalised claim of privilege

56    The second reason for Apple’s submission that privilege is not established lies in the vagueness of the claims for privilege. Of the 154 documents listed in Annexure D the reason given to justify the privilege claim is invariably ‘document prepared by IP Center for the purpose of IP Center lawyers giving legal advice to senior management or for use in litigation’.

57    The basis for the privilege claim is stated in Annexure D to be:

A confidential communication/document made or prepared for the dominant purpose of enabling Samsung to obtain, or its legal adviser to give, legal advice, and/or a confidential communication/document made or prepared for the dominant purpose of Samsung being provided with professional legal services relating to then anticipated or pending Australian or overseas proceedings in which Samsung may be, or might have been, a party.

58    The Court concurs with Apple’s claim that such robotic repetition, without detailed description or explanation, gives the Court little confidence that the document for which privilege is claimed was brought into existence for the dominant purpose of the litigation. This is a factor to also be considered by the Court in its overall assessment of the claim for privilege.

(c) Incomplete discovery

59    As to Apple’s submission of incomplete discovery, the disclosures made after the original Annexure D attached to Mr Kim’s first affidavit had been prepared and its accuracy attested to by Mr Kim create uncertainty. By letter dated 2 July 2012 Ashurst, solicitors for Samsung, notified Freehills, solicitors for Apple, of an additional six documents relevant to the proceedings, previously the subject of a privilege claim, and stated that the claim for privilege was no longer made for each of the six documents. Five of these documents were then attached to a witness statement of Heungmo Lee dated 13 August 2012. The letter also listed 11 more documents in Korean which had been translated into English. No claim for privilege was made in respect of the 11 documents.

60    By letter dated 23 July 2012 Ashurst wrote to Freehills revealing another document which later was attached to the statement of Heungmo Lee.

61    By letter date 31 July 2012 Ashurst notified Freehills of four documents which Ashurst had previously claimed privilege over but which were now deemed to not be subject to privilege. One such document, with attachments, was later attached to the witness statement of Dr Seungho Ahn dated 10 August 2012.

62    By a letter dated 14 August 2012 Ashurst notified Freehills of further documents which, through inadvertence, were not discovered and for which privilege was claimed. On the same day Samsung, in the principal proceedings, filed a witness statement of Mr Yong-Tae Lee, Vice President and General Counsel of Samsung, which attached as Annexure A a redacted copy of one of such documents, known as YTL-3. A portion of such document is the subject of a claim for privilege, as discussed hereunder.

63    These events create speculation as to the accuracy of the discovery undertaken by Samsung. However, the Court is also mindful of the onerous task of discovery bearing in mind the sheer volume of documents required for this litigation. The Court will take Apple’s submission into consideration in its conclusions.

(d) Lack of independence

64    The above circumstances are compounded by the fact that Mr Kim, as an employee of Samsung, may not possess the requisite independence sufficient to satisfy the onus upon Samsung. In Seven Network at [15] Graham J who found that, as a general proposition, an in-house counsel did not possess the requisite independence to make such claim. His Honour held:

In my opinion, an in-house lawyer will lack the requisite measure of independence if his advice is at risk of being compromised by virtue of the nature of his employment relationship with his employer. On the other hand, if the personal loyalties, duties and interests of the in-house lawyer do not influence the professional legal advice which he gives, the requirement for independence will be satisfied.

65    In Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No 2) [2007] FCA 1445, Graham J repeated this principle at [35]. The Court also notes the observations of Brennan J in Waterford v Commonwealth of Australia (1987) 163 CLR 5 at 70-73 wherein his Honour cast serious doubt upon the practice of in-house lawyers being involved in a privilege claim. At 72 his Honour said:

The disincentive of sanctions which professional disciplinary tribunals may impose for breaches of ethical rules is diminished when the breach is committed in the interests of an employer and the security and environment of employment tend to insulate a salaried lawyer from the chief disciplinary influence of the profession - the opinion of one's professional peers. I am therefore unable to accept the notion that salaried lawyers are generally to be assimilated to the position of the independent legal profession for the purpose of determining the availability of legal professional privilege. Although this view may seem to give insufficient acknowledgment to the personal integrity, as well as the competence, of many salaried lawyers, we are concerned with a general legal rule which is framed not with regard to the characteristics of individuals but with regard to the influences that naturally attend the relationship of employer and employee.

66    In Rich v Harrington (2007) 245 ALR 106 Branson J referred to the observations of Graham J in Seven Network but made no determination whether it was sufficient for an in-house counsel to prepare an affidavit of discovery (see [56]). The Court considers that it would be unnecessarily restrictive to hold that a claim for privilege cannot be maintained merely because the lawyer verifying such claim is an in-house lawyer. To so hold would cast an unnecessary qualification upon the integrity of that person. In this respect the Court does not follow the observations of Graham J. The Court observes however, that this factor may prove to be a consideration to be taken into account in determining whether, having considered all of the evidence, such claim should be upheld.

67    Had a legal practitioner who was not a Samsung employee testified that he or she had personally inspected each document in respect of which privilege was claimed and provided the certification that the dominant purpose for the creation of such document was litigation or the prospect thereof, the Court could accept such statement. This is not to suggest that Mr Kim’s affidavit may not be correct, and the Court notes that Apple does not suggest any impropriety whatsoever in Mr Kim’s claims. However because of Mr Kim’s employment with Samsung, the statements made in the affidavit, particularly when he does not himself state that he has inspected the documents, severely undermines confidence in the reliability of the claim to privilege in the documents.

FINDING

68    Because of the nature of the issues raised in the principal proceedings, the evidence in the proceedings will involve complex technical and legal issues. The Court accepts the submission of Samsung that the task of production of documents has imposed, and will continue to impose, significant burden upon it. The Court is satisfied upon the evidence before it that this task has largely been addressed, although it appears that documents which were not previously thought to be relevant may become relevant as the hearing in the principal proceeding progresses. Mr Kim’s first affidavit establishes that over 500,000 potentially relevant documents were collected by Ashurst as potentially falling within the categories of documents which are the subject of the discovery order.

69    Despite the shortcomings in Samsung’s privilege claims, the Court considers that the documents claimed to be privileged might properly attract such protection. The Court is so minded since the majority of the documents were brought into existence after Samsung claimed litigation was reasonably contemplated (July 2010). Further, Samsung has urged the Court, in case of doubt, to inspect the documents, a course which has been adopted previously by the Court in cases of doubt: see Trade Practices Commission v Sterling at 246 per Lockhart J. Such course is a matter for the discretion of the Court: see also Fair Work Ombudsman v Quest South Perth Pty Ltd [2012] FCA 608. Bearing in mind that the High Court stated in Grant v Downs at 689 that a court should not be too reluctant to go behind the formal claim of privilege and inspect the documents itself, the Court has decided to inspect a representative portion of the documents. The purpose of such inspection is to determine whether on its face the nature and content of the document supports a claim for privilege: see AWB Ltd v Cole and Anor (No 5) and Kirby v Centro Properties Ltd (No 2) at [11].

70    The Court has considered more than half of the documents claimed to be privileged. These documents are contained in four lever arch folders. From such inspection the Court has satisfied itself that those documents were prepared in anticipation of litigation at a time when litigation was reasonably contemplated, or prepared after the commencement of litigation for the purpose of assisting in the preparation of the litigation: see Prysmian at [76] and [80]. It could not be said that such documents were prepared for a commercial or other purpose, as anticipated by Apple.

71    Such documents provide information for legal purposes relating to the litigation, relating to the status of Samsung’s patents, and include minutes of meetings where such matters were considered, and some contain advice concerning litigation strategy.

72    For these reasons, despite the shortcomings in the evidence in support of the claim, the Court is satisfied, based on the inspected documents, that Samsung’s claim for privilege in the claimed documents is justified.

WAIVER

73    The Court now turns to the question whether the partial disclosure of certain documents by Samsung leads to the conclusion that the remainder of each of those documents nevertheless maintains an entitlement to privilege. Generally where a party acts inconsistently in regard to the disclosure or use of documents which it claims are the subject of privilege, such inconsistency may amount to a waiver of privilege.

74    Apple submits that Samsung has waived privilege in respect of the entirety of certain documents. This waiver occurred because Samsung has produced some documents where redacting has made the documents unintelligible and has deployed other documents in a manner inconsistent with the maintenance of privilege. These documents were redacted in part and were attached to witness statements of Heung Mo Lee dated 13 August 2012 and of statements of Mr Yong-Tae Lee dated 14 August 2012 (‘Lee statement’) and Dr Seung Ho Ahn dated 10 August 2012 (‘Ahn statement’). Apple consequently seeks discovery of unredacted copies of the documents referred to in two annexures known as YTL-2 and YTL-3 to the Lee statement. This claim extends to related documents, namely unredacted copies of any advice of Quinn Emanuel, parts of which were summarised in YTL-2 and YTL-3.

75    Apple, on the same basis, also seeks discovery of unredacted copies of documents recording any advice from Quinn Emanuel or any communications between Samsung and Quinn Emanuel concerning a proposal to license Apple companies to exploit any of Samsung’s standards or essential patents or the appropriate royalties. Apple also seeks discovery of documents listed on the Annexure B privilege list provided on 1 June 2012 and the amended Annexure D privilege list provided on 14 August 2012 relating to the offering of a licence to any Apple company to exploit any of Samsung’s standards, essential patents or the appropriate royalty rate for any such licence. Lastly, Apple seeks an unredacted copy of the document described as Annexure SA-5 to the Ahn statement. These claims are made on the basis that the unredacted copies of the documents now produced make a reference to these other documents.

76    The Court will now address the relevant documents. The Court observes that YTL-2 is a copy of YTL-3, but YTL-2 is in Korean. Annexure YTL-3 to the Lee statement and Annexure SA-5 to the Ahn statement are heavily redacted. Apple submits that the redaction makes it impossible to understand the remainder of the document, and submits that such heavy redaction is inconsistent with the preservation of privilege claimed in respect of the remainder of the documents. Apple claims that Samsung has waived privilege in a document which itself draws upon other material. Document YTL-3 contains references to discussions with Quinn Emanuel, also to ‘Samsung’s evidentiary material relating to past contracts’ and to ‘other advices and opinions’. Apple submits that the deployment of such document is inconsistent with the maintenance of privilege in the communications referred to in the document.

77    Apple submits that Samsung is deploying ‘this partially waived document’ (presumably referring to YTL-3). This redacted document supports Samsung’s argument that it was its intention to make a FRAND offer; that it did make a FRAND offer to Apple; and that accordingly the offer was therefore FRAND. This issue is one of the contested issues in the proceedings.

78    The Lee statement refers to working with Quinn Emanuel and to obtaining their ‘signoff’ as a step in such process. Apple submits that the giving of this evidence and the deployment of YTL-3 in support of the evidence is inconsistent with the maintenance of confidentiality in any advice of Quinn Emanuel.

79    Apple submits that privilege over these documents has been waived because they have been intentionally released ‘in a manner which is incompatible with the retention of confidentiality’: see Abigroup Ltd v Atkins (1997) 42 NSWLR 623 at 634 (per Bainton J). Further, Apple submits that waiver occurs ‘where the content of the confidential communication is put in issue in the proceeding by the party entitled to the privilege’: see Federal Commissioner of Taxation v Coombes (1999) 92 FCR 240 and Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1996) 137 ALR 28 per Kirby J.

80    Apple also submits that inconsistency between claiming privilege and disclosing a document is to be determined in context of the circumstances of the case and having regard to considerations of fairness arising from circumstances: see Osland v Secretary, Department of Justice (2008) 234 CLR 275 at [45] per Gleeson CJ, Gummow, Heydon and Keifel JJ. Apple submits that consideration of these principles leads to the conclusion that privilege has been waived.

81    Samsung submits that privilege is only deemed to be waived if it is shown to have acted inconsistently with the maintenance of the confidential communication under the documents claimed to be privileged: see Mann v Carnell (1999) 201 CLR 1 at [28]-[29] and [34]-[35] per Gleeson CJ, Gaudron, Gummow and Callinan JJ. Samsung submits that there is no basis giving rise to any claim for waiver; there is no evidence of any deployment of privilege material or of any relevant inconsistency or unfairness in relation to the use of YTL-3 and of SA-5; nor has there been any evidence or reason advanced why privilege has been waived in relation to all of the 178 documents in Annexure D or any part of those documents. Samsung denies that its conduct has been inconsistent with maintenance of privilege over the relevant documents.

82    Annexure YTL-3 to the document produced and attached to the Lee statement is a report made to eight persons in support in respect of the FRAND offer made by Samsung to Apple, apparently on or about 13 June 2011.

83    Annexure YTL-3, for the most part, has been disclosed. Such document is relied upon apparently for the purpose of demonstrating that a FRAND offer has been made. However the necessary detail established as the foundation of the offer is absent because of the redacted portions.

84    The reliance by Samsung upon part of the report has the result that other portions are excluded, and it could have the consequence of creating a false representation as to the document and consequently, an injustice. This is the very problem identified in Attorney-General (NT) v Maurice (1986) 161 CLR 475. This circumstance was also the subject of an observation by Allsop J in DSE (Holdings) Pty Ltd v Intertan Inc (2003) 127 FCR 499 at [58] when his Honour said:

… the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.

85    The Court considers that in respect of this document, waiver has occurred by reason of the disclosure of the bulk of the document. In the present circumstances it is obvious that the related report was placed in evidence for a forensic purpose. In these circumstances, the principle referred to by the High Court in Attorney-General (NT) v Maurice arises. At 482 of that case Gibbs CJ said:

… where a party disclosed a document which contained part only of a memorandum which dealt with a single subject-matter, and then read the document to the judge in the course of opening the case, it was held that privilege was waived as to the whole memorandum: Great Atlantic Insurance Co. v. Home Insurance Co. (1981) 1 WLR 529 at 538-9… The same test must be applied in deciding whether the use in legal proceedings of one document impliedly waives privilege in associated material. In Nea Karteria Maritime Co. Ltd. v. Atlantic & Great Lakes Steamship Corporation (No. 2) (1981) Com.LR 138 Mustill J. dealt with this question and, at p 139, suggested the following test:

“... where a party is deploying in court material which would otherwise be privileged, the opposite party and the court must have an opportunity of satisfying themselves that what the party has chosen to release from privilege represents the whole of the material relevant to the issue in question. To allow an individual item to be plucked out of context would be to risk injustice through its real weight or meaning being misunderstood.”

86    The Court is satisfied that Apple has discharged the onus of showing that waiver has occurred with respect to document YTL-3: see Nine Films and Television Pty Ltd v Ninox Television Ltd (2005) 65 IPR 442 (‘Nine Films’) at [21], per Tamberlin J; Rich v Harrington at [8]. Samsung has placed itself in an inconsistent position claiming privilege over a portion of the document but thereafter releasing much of the document. The Court is satisfied that Samsung, by such disclosure, has conducted itself in a manner ‘inconsistent with the maintenance of the privilege as to be unfair’ (see Tamberlin J in Nine Films at [8]).

87    Such conclusion however does not have the consequence that other documents, referred to in YTL-3 are thereby deprived of privilege. Those documents are the approvals of the eight persons nominated in YTL-3 and the passing reference to ‘discussion with Quinn’ (that is, Quinn Emanuel). These documents do not lose their status as privileged documents merely because their existence is referred to in evidence. Such reference has not ‘opened up’ the nature of the legal advice Samsung has received: see Fort Dodge Australia Pty Ltd v Nature Vet Pty Ltd [2002] FCA 501 at [11]; Rio Tinto Ltd v Commissioner of Taxation (2005) 224 ALR 299 at [30]-[32]; Australian Agricultural Company Limited v AMP Life Limited [2006] FCA 371 at [23]-[34]. Those documents may have been documents used or referred to in the offer containing YTL-3, but there has been no waiver of those documents merely because of such brief reference. Indeed it is not even clear that an advice from Quinn Emanuel exists, since YTL-3 merely refers to ‘discussion’ with Quinn Emanuel. It follows that the waiver in respect of YTL-2 and of YTL-3 does not extend to documents contained in Annexure B, nor in Annexure D.

88    The Court will now address Annexure SA-5 to the Ahn statement. This document, originally in Korean and translated into English, is identified as being a report of a meeting held on 10 September 2010. The source of the document is not stated. However it bears the following notation:

Confidential and Privilege[d]

Attorney Client Communication and Attorney Work Product

89    The document refers to numerous dates starting from 23 December 1992, described as the ‘Priority Date’ and appears to be a list and a description of patents. The document, which is in tabular form, refers to the country of registration of the patent and contains remarks. Under the ‘Remarks’ column there is a reference to lawsuits apparently instituted by Nokia and HTC.

90    In the centre of the table there is another column which has been redacted.

91    Since virtually the whole of the document appears to have been disclosed, the Court considers that the remaining portion cannot maintain the claim for privilege. There is nothing to suggest that such document contains any legal professional privilege information. Further, the document, without the redacted portion, is wholly incomplete and meaningless. As with YTL-2 and YTL-3, privilege cannot be maintained with respect to the redacted portions of this document. However as referred to above, there is no basis by reason of such waiver to find that any other documents have lost their status of privilege. Indeed it is not apparent from SA-5 to the Ahn statement that any other such documents are referred to. Even if they were, the Court would make the same finding as it has with respect to YTL-2 and YTL-3.

92    Samsung has referred to numerous authorities relating to waiver where that involves motive, purpose or state of mind being put in issue by pleading or evidence. Taking into consideration the nature of the report, these issues do not arise. The report is one concerning factual issues. Accordingly the Court rejects Samsung’s submissions on this aspect.

CONCLUSION

93    For the reasons referred to earlier in this decision the Court finds that the claim for privilege by Samsung in respect of the documents contained in Annexure D is established.

94    With respect to the claim of waiver, the Court finds that privilege has been waived with respect to annexures YTL-2 and YTL-3 to the witness statement of Mr Yong-Tae Lee dated 14 August 2012 and in Annexure SA-5 to the witness statement of Dr Seung Ho Ahn. The Court concludes that the whole of these documents are no longer the subject of privilege, privilege having been waived by virtue of the documents’ partial disclosure.

95    During the hearing, the parties requested that they be provided with an opportunity to view the Court’s judgment so as to ensure that no confidential material is disclosed by the Court. The Court will hand down its reasons, but will provide the parties with seven days to make any submissions on any issue of confidentiality that may arise before the judgment is made available to the general public.

Associate:

Dated:    10 December 2012