Patents: "external eyes only" disclosure in confidentiality club agreements

Background

It is common practice in patent cases for the parties to reach a confidentiality club agreement (CCA), where access to confidential documents is restricted to named individuals in return for appropriate confidentiality undertakings. 

In Warner-Lambert Co v Glaxo Laboratories Ltd, the Court of Appeal commented that in some circumstances it might be just to exclude a party, during the interlocutory stages of an action, from knowing highly technical confidential information if the party was a trade competitor of their opponent ([1975] RPC 354 (CA)). 

The courts have ordered that confidential business secrets be disclosed on an external eyes only basis during patent proceedings (Ipcom GmbH & Co Kg v HTC Europe Co Ltd and others [2013] EWHC 2880 (Ch); Unwired Planet International Ltd v Huawei Technologies Co Ltd [2017] EWHC 711 (Pat) and [2017] EWHC 1304 (Pat)).

Facts

T brought a claim for infringement of two patents for broadband internet technology, which had been declared essential, against Z.

Z counterclaimed challenging validity and infringement and for a declaration of non-essentiality, and also raised issues relating to reasonable and non-discriminatory licences and remedies.

During the proceedings, T proposed a CCA containing "confidential information" and "highly confidential information". T argued that, following IPCom, Unwired Planet, arbitration procedure and related US  litigation, disclosure of the second category should be limited to external eyes only, that is, to external solicitors, counsel and independent experts. 

Z objected, arguing that it was necessary for two named individuals from the Z group parent company to have access to those documents.

Decision

The court refused to approve the establishment of an external eyes only confidentiality regime, and ordered disclosure of the licence agreements in issue. 

The court dismissed T's arguments in relation to arbitration proceedings which may be heard in private, and the related US case. Proceedings in the High Court were public, in accordance with the principle of open justice. 

The court distinguished IPCom. The disclosure issue in IPCom related to licence agreements that had been entered into by two licensors, Nokia and HTC. As IPCom was a licensing company which was competing in obtaining licence fees from third parties for different patent portfolios, knowledge of confidential terms in those agreements might give IPCom an unfair advantage in its own licensing negotiations. That case was still at the interim stage and might not go to trial. In those unusual circumstances, where the documents were of limited relevance and their disclosure could be unnecessarily damaging, the court had decided not to allow disclosure to individuals within IPCom at the interim stage. 

The court also distinguished Unwired Planet, in which the parties had agreed a confidentiality regime which included an external eyes only tier. However, this was not a desirable state of affairs as the legal representatives had access to information which they were not able to share with their clients.

The key principles relating to disclosure of confidential information in intellectual property (IP) cases are:

• Parties may choose to agree an external eyes-only tier, as in Unwired Planet.
• CCAs limiting access to sensitive documents to specific individuals within one of the parties, in order to protect confidentiality, were often essential in IP cases which required disclosure of confidential information, and were now commonplace.
• Redactions to documents could be made to exclude material which was confidential and irrelevant to the dispute.
• External eyes-only access to individual documents of peripheral relevance, whose disclosure would be damaging, might be justified in specific cases.
• In certain exceptional cases, external eyes only access to specific documents of greater relevance might be justified, at least at an interim stage.
• In the absence of exceptional circumstances, each party had to be able to see and discuss with its lawyers the relevant parts of the key documents in the case.

An external eyes only tier enabled a blanket exclusion of access by one of the parties to the relevant parts of key documents. This was incompatible with the right to a fair hearing under Article 6 of the European Convention on Human Rights, and with the principles of natural justice, as well as with the obligations of lawyers to their clients. The principles on which solicitors were obliged to act on behalf of clients instructing them required the sharing of all relevant information of which they were aware.

Here, the reason why disclosure of licence agreements had been ordered before service of the statements of case was because they were likely to be highly relevant documents. The terms of the licence which the court might be asked to decide had to be reasonable and non-discriminatory, so other licence agreements entered into by T were, or were likely to be, key documents. Disclosure of the licence agreements ought not to be limited to external eyes only, but the third parties involved in those licences ought to be given the opportunity to vary or set aside that order before disclosure was made. The burden of proof had to be on those who wished to limit access to key documents to external eyes-only to justify that limitation, rather than on the party who was, prima facie, entitled to see the documents to justify its entitlement to access.

Comment

Any party trying to obtain a blanket "external eyes only" disclosure order from the Patents Court will have to provide evidence of exceptional circumstances justifying such an order. Cases, such as this one, which involve issues of licensing of patents declared essential to a standard, do raise issues of third party confidentiality related to relevant existing licences by the patent owner. While third parties should be given the opportunity to oppose disclosure to internal representatives of the other party, the court here made it clear that they would bear the burden of proving that the damage to their interests outweighed the general principles of justice.

Case: TQ Delta LLC v Zyxel Communications UK Ltd and another [2018] EWHC 1515 (Ch).

First published in the August 2018 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.