Death Penalty Sanctions in ITC Case | Kennedy Law, P.C.

Federal Circuit Affirms Death Penalty Sanctions in ITC Case

Author: Stephen Kennedy

Date: 02/22/2017

On February 15, 2017, the Federal Circuit affirmed a default-type death penalty sanction against a party found to have intentionally destroyed evidence in an investigation of patent infringement by the International Trade Commission. The case is Organik Kimya v. International Trade Commission, No. 2015-1774, 2015-1833.

The case stemmed from multiple efforts by Organik Kimya and former Dow employees to destroy evidence.  The case began in May 2013, when Dow filed a complaint with the ITC requesting an investigation into whether Organik Kimya’s opaque polymer products infringed four Dow patents. The ITC granted Dow’s request, and the parties began discovery. During the proceedings, Dow amended its complaint to add allegations of trade secret misappropriation when it discovered that Organik Kimya may have coordinated the production of its opaque polymers with the assistance of several former Dow employees. As Dow attempted to obtain discovery relating to the activities of the employees, Dow discovered “spoliation of evidence on a staggering scale,” according to the Federal Circuit.

Dow obtained an order from the ITC administrative law judge to allow Dow’s forensic examiners to inspect one of the former employee’s laptops in Turkey. Four days before the forensic investigation took place, and three days after the ALJ issued the discovery order authorizing the examination of the computer, Organik Kimya began overwriting the laptop’s hard drive by copying the Program Files folder at least 108 times. While performing this overwriting, Organik Kimya also backdated the computer’s internal clock so that the metadata on the copied files would hide the fact that the overwriting took place only days before the inspection. Organik Kimya even ran a program called CCleaner “multiple times to delete a large percentage of the C drive and all of the D drive in Dr. Perez’s laptop.” To ensure that its efforts had been successful, Organik Kimya also used a program called WinHex at least twelve times to see whether it could recover any of the deleted information before the court ordered forensic investigation took place.

After Dow informed the ALJ of the forensic examiners’ findings, Organik Kimya submitted a letter to the ALJ explaining that the IT work done on Dr. Perez’s computer was simply maintenance undertaken because Dr. Perez was encountering troubles with the computer. Organik Kimya also asserted that there was “no ill-intent or desire to destroy evidence.” The ALJ found Organik Kimya’s explanation to be “a work of fiction.” He found that Organik Kimya’s actions made it impossible to know the exact volume and content of any previously recoverable data, but noted it was at least clear that it involved “potentially hundreds of thousands of files.” The ALJ also found that there was “no innocent explanation” for Organik Kimya’s conduct relating to the use of the CCleaner program. The ALJ ultimately found that Organik Kimya acted in bad faith when, in contravention of his Order, Organik Kimya undertook the “massive spoliation of evidence.”

Another employee was discovered to have had communications with Organik Kimya, but the employee claimed under oath that his communications were “never of a technical nature.” A forensic inspection conducted by Dow, however, found that Dr. Nene engaged in various technical discussions with Organik Kimya. Dow also uncovered two emails relating to the employee’s involvement with Organik Kimya and evidence of Organik Kimya’s attempt to purge those emails. These emails read: “Confidential information related to the consultant [employee] are still recorded here, they were supposed to be erased by the IT department;” and “can you print them and give them to me please? Then we should erase them from the system please.”

One of the former Dow employees eventually testified that, at the behest of Organik Kimya, he destroyed a hard drive from a laptop with a hammer and destroyed a “bag full of zip drives.”

Yet another former Dow employee tried to delete 2,742 files from his laptop, but they were recovered by forensic examination. The forensic examination found that this employee had used “numerous undisclosed and unproduced USB storage devices” on his computer, but left them in his computer storage bag. The computer bag was accidentally left at “a bathroom of a highway rest stop.”

In affirming the ITC Commission decision to enter default-type death penalty sanctions, the Federal Circuit ruled that the Commission “can issue default judgment sanctions in appropriate cases when a party disobeys a discovery order if the Commission determines that the conduct at issue warrants such sanctions.” The appellate court further held that “[t]his does not mean that a party’s failure to comply with a discovery order will warrant imposing default judgment sanctions in every case; instead, such sanctions can be imposed in appropriate cases ‘to penalize those whose conduct may be deemed to warrant such a sanction’ and ‘to deter those who might be tempted to such conduct in the absence of such a deterrent.’”

A case of this nature demonstrates the value in having competent computer forensic experts available to analyze computers and track down lost files. Litigation counsel must likewise be informed of the need to investigate every possible lead regarding the existence (and/or destruction) of electronic files.

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