More from Epic v. Google: everything we learned in Fortnite court
Phil Harrison, July 15th, 2018, “Strategic Rationale”:
I‘ve taken a stab at a high-level strategic rationale for an investment in Epic.
Fortnite is (or can be) the leading business driver for Google across:
YouTube (already 100M+ increase in game watch time MAU)
GCP (to shift 130M+ players from AWS and build an anchor tenant in games)
Yeti (Fortnite + Unreal Engine support for all games)
[email continues]
July 16th, 2018, in a reply from Dave Sobota:
As a potential alternative, Phil is proposing we consider approaching Tencent to either (a) buy Epic shares from Tencent to get more control over Epic (unclear how that helps us without a majority share) or (b) join up with Tencent to buy 100% of Epic (and then of course we do a lot of deep commercial things with Epic).
The direct investment route had Google internally proposing to invest ~$2B in exchange for a ~20 percent stake of Epic. Google wrote: “Will require a substantial investment to gain influence.”
The Tencent / controlling interest route sounded very tentative:
The company may be open to a second large strategic investor as a counterweight to Tencent
Tencent may not be willing to sell shares, or may seek to block another strategic investor (investor rights unknown)
Update: Fixed typo and added a line about “Yeti” that I missed copying over.
We’re now seeing the genesis of “Project Elektra” — which appears to be Google straight-up admitting in internal emails and presentations that it wanted to buy enough of Epic Games to make Fortnite a centerpiece of Android, partnering with Epic games stakeholder Tencent to do so if necessary.
“Investment was the only way people could realistically think of to sway them on Epic’s approach to Android,” reads part of an email from Google’s Don Harrison.
Here’s the full email from July 16, 2018:
We are bringing a package offering to BC on Thursday re Epic. Spoke to Jamie and I think we need a couple pages about what investment could look like and someone there to discuss (based on whatever we can glean publicly). We just did a prep call and investment was the only way people could realistically think of to sway them on Epic’s approach to Android — because it’s easy to imagine us investing billions at some ridiculous valuation (for everyone except for the corpdev folks).
He reports to Google’s chief business officer Philipp Schindler, who, in turn, reports to Google CEO Sundar Pichai. Schindler would have been personally required to approve the $147M offer to Epic.
Pichai would not, but we’re seeing an email from 2018 where he suggested that Philipp, Sundar, Ruth [Porat, Google’s CFO], and Kent [Walker, Google’s CLO] should be involved in a broad discussion about the investment.
Judge James Donato has just decided that while he’ll allow some of Spotify’s secret numbers to be sealed, he won’t seal them all — in fact, I’m pretty sure he just said the specific rates Spotify negotiated with Google will not be sealed.
Those numbers were one of the first big dramatic moments in the trial:
I see Sweeney here in his usual spot in the courtroom. He was scheduled to appear last Thursday — instead, a protest on the Bay Bridge wound up postponing his appearance.
Epic will likely call him to the stand today.
The judge has not decided either way — he says he’ll see us back here on Monday. I’ll see you back here then, too!
It feels like the judge has made up his mind to some degree. He’s asking Epic what it believes would be a sufficient remedy, and Epic is asking for a mandatory jury instruction.
In September, Epic had simply proposed a “permissive” jury instruction: “that the jury may, if it chooses, infer that the evidence Google destroyed would have been harmful to Google’s case and helpful to Plaintiffs’ cases.”
But Judge Donato is not 100 percent sure what good the mandatory instruction will do.
A point Walker tried to make to Epic but is now making more freely under Google’s more friendly questioning: he believes Google’s normal process should catch any “fake privilege” attempts.
“Sometimes they just make mistakes,” Walker says of Google’s business employees. “They think of the word privileged as similar to confidential, but we try to catch that during the discovery process.”
“We produce more documents than any company I can think of,” he says.
“When you go out to dinner, it doesn’t matter what’s printed on the menu, it matters what the kitchen puts on the plate. What is the discovery that was or wasn’t put on the plate?”
Judge Donato is not happy. Google tried to point out the passage Epic didn’t, but the judge cut Google short.
Donato says Google should have made employees live up to the company’s obligations and “ensure employees that were having communications substantive to a case not be given undue discretion not to preserve them.”
Epic wasn’t able to say how much extra lawyer time it took on its end. (The judge asked this particular set of questions.)
Walker wouldn’t say if Google was taking any new steps to make sure employees weren’t abusing privilege but that it was following up internally in the legal department.
Google is now getting its turn to question its own chief legal officer.
Even though this has apparently come up in another Google legal case, Walker claims he wasn’t previously aware of the phrase — or that intentionally marking things as privileged, just to keep them more private, happens within Google.
He concedes that some Google employees do copy in lawyers, even when no legal advice is being sought or received. (Those are Moskowitz’s, words, not his, but he says yes.)
Walker on how simply labeling documents “attorney/client privilege” is not enough to make them privileged and is not proper.
One of the people who didn’t understand it: Google and Alphabet CEO Sundar Pichai.
And employees under legal hold can’t turn it back off.
“My understanding is we’ve turned history default on for everybody in the company, and that for all cases where we have a litigation hold, we are preserving by default all those messages,” he says.
“She is by no means a rogue example in the evidence I have seen in this case — she is a typical example,” says Judge Donato of Google’s Margaret Lam.
“I don’t want her to be singled out — she is in the unfortunate position of being a testimony giver in court,” says Donato.
“Nor is it just one or two examples,” he adds.
Walker tried to suggest that’s why it doesn’t keep all chats, the way it keeps all emails after a litigation hold. The judge wasn’t having it — he says CEO Sundar Pichai’s testimony refutes that chats weren’t for business.
Now, Moskowitz is suggesting Google did a 180 to turn history on for all employees by default because it “got caught.”
“After we found that employees hadn’t been following the directions we’d given,” says Walker.
“I did not.”
“Nobody did, right?” asks Epic’s attorney.
“I don’t know the answer to that question,” he begins, adding that the assumption was that multiple notices and reminders and a point of contact with legal, etc, would be enough.
“We generally assume that when we give employees directions, they’ll follow the direction and when not sure of them they’ll ask questions,” says Walker.
Walker says he did indeed read the testimony of Margaret Lam, a Googler who initially claimed no lawyer ever talked to her about her preservation obligations and claimed she thought she only had to preserve things that mentioned Epic for this case.
Walker says employees got multiple notices, reminders, and a legal point of contact when there was a legal hold and is following up about Lam’s situation.
Let you know when we get something more concrete.
That might be true, but that is not a good look for Google. Walker seems a bit shaken. Judge Donato is accusing him of “tap-dancing around” and trying to pass the buck.
Now the judge is asking: Why didn’t you just preserve the chats? Why did you leave it up to each individual employee to decide?
“What we did not have the ability to do immediately was to impose litigation holds that would carry across for a subset of individuals to track the various cases” Google was involved in.
The judge isn’t satisfied. “That’s not what I was asking.”
“You tried,” says the judge, turning away, as if giving up on getting a straight answer.
Judge James Donato: “The answer that is not no, the answer to that is yes, based on the record presented to me by the Google witness in January. That fact is carved in stone, don’t dance around it.”
“You’ve had the ability to flip a switch,” says Donato.
“In 2008 I was involved with our engineering team ... In the years since I’m not sure who was responsible for updating our retention policies,” he says, in response to a question about who was in charge of setting the 24-hour history-off retention policy.
He says it’s correct that legal holds did not change Google’s policy about automatically deleting chats.
Google chief legal officer Kent Walker’s reply:
I think for many years we used direction to employees because we felt that the overwhelming majority for use cases Talk or Chat [...] were not a high business utility, but where there was a litigation hold, we would issue specific directions to employees to retain those materials.
Google chief legal officer Kent Walker, to Epic attorney Lauren Moskowitz.
“A business retains records for as long as it needs for business purposes,” he says, suggesting the 24-hour default deletion period seemed adequate, “unless we thought there was some reason we’d need them.”
We’re looking at this email again, which Walker appears to be saying he co-wrote and confirms he co-signed.
He says part of the rationale for the email, which he says was sent during his first year as Google’s general counsel (a position he held from 2006 through 2018, he confirmed) was to set some standards for document retention.
Google employees used chat for substantive business discussions.
Google could have turned chat history to on as a default setting but chose not to.
Google did not follow up with the custodians in this case to audit or monitor their chat preservation decisions or practices.
Google [was] unable or unwilling to follow the instructions to preserve chats.
Each employee was effectively left to make his or her own call as to whether to preserve a chat communication or not.
And that’s before we even got to “fake privilege”. The judge says he found the testimony of a Google lawyer who discussed that last bit in court “to be evasive and not credible.”