Court of Appeal clarifies disclosure of confidential information in UK litigation – OnePlus v Mitsubishi and others

Background

Mitsubishi Electric Corporation and Sisvel International SA are both members of a 3G and 4G patent pool administered by Sisvel. Mitsubishi and Sisvel sued for patent infringement a number of companies, including companies in the OnePlus/Oppo and Xiaomi groups of companies.

The patents concerned are alleged to be essential to the cellular standards. Therefore, in the event that a patent is determined to be valid and infringed and provided that the defendants indicate their willingness to enter into a licence on FRAND terms, the defendants will be subject to a FRAND injunction preventing infringement of the patent unless they enter into a licence on the terms determined by the Court to be FRAND.

At the case management hearing in July, the defendants were ordered to amend their FRAND statements of case to particularise any positive case they intend to run in reliance on the claimants’ FRAND obligations including to identify any comparable agreements they intend to rely upon. In order for the defendants to be able to plead fully to comparables Mitsubishi and Sisvel were ordered to disclose any licences which involve any patent in the pool and to disclose any assignments of patents in the pool, although the case management judge had expressed scepticism as to the likely relevance of at least the latter category. Sisvel had already disclosed 23 licences to the patent pool in issue.

The first instance court also approved the parties’ proposed confidentiality regime, which provided for a Highly Confidential category to which only named, pre-approved employees of the parties would be admitted, and an external only club (which was called Attorneys Eye’s Only (AEO), in the US fashion).

Following the case management hearing Mitsubishi and Sisvel disclosed a further 150 documents; 36 of which were designated AEO. Xiaomi challenged the AEO designation of all documents claiming they should be re-designated to Highly Confidential. Oppo challenged the AEO designation of just 6 of the documents and also sought permission for 3 of its internal licence negotiators to be admitted to the Highly Confidential club, following the Claimants’ rejection of their admission.

Findings of the first instance judge

The first instance judge, Sir Alastair Norris, found that Oppo’s request to de-designate the 6 documents, involving four different counterparties, was a considered and targeted one which was supported by evidence that these were the licences, which Oppo’s external representatives considered necessary in order to plead their case. However, because of the risk to third parties, who had made their concern known in letters to the court and, in the case of two related companies, by intervening in the matter, the judge ordered that Oppo’s Highly Confidential club members would need to give undertakings directly to the counterparties of the de-designated agreements not to participate in licensing negotiations with the counterparties or their subsidiaries or affiliates.

Sir Alastair dismissed Xiaomi’s blanket de-designation request, stating that the Claimants had set out the basis for the AEO designation and that any de-designation application should have been made on a more targeted document-by-document basis.

Finally, Sir Alastair dismissed Oppo’s application for three of its in-house licensing negotiators to be admitted to the Highly Confidential club, having considered the fact that:

i) Confidential information once known cannot be unlearned;

ii) An individual possessed of confidential knowledge will not in practical reality be able to avoid its use;

iii) Disclosure to key people who may be involved in commercial negotiations risks causing unnecessary harm; and

iv) In striking the balance between affording disclosure and inspection and preserving confidentiality it is material to know the size and structure of the receiving party.

Court of Appeal’s determination

Both Oppo and Xiaomi appealed the first instance decision, and in order to avoid any undue delay in them pleading their FRAND case, which could have impacted the timetable through to trial in October 2021, the Court of Appeal ordered expedition. The first instance judgment was handed down on 9 October 2020 and the appeals were heard before the Court of Appeal (Floyd LJ, Males LJ and Lewis LJ) on 5 November 2020, with judgment of the Court of Appeal being handed down 19 November 2020.

The Judgment of the Court, given by Floyd LJ, set out the legal principles and cases which had addressed the issue of disclosure of confidential information, starting with Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354, Al-Rawi and others v Security Service (JUSTICE and others intervening) [2011] UKSC 34; through to IPCom GmbH & Co KG v HTC Europe Co. Limited and others [2013] EWHC 52 (Pat) (Floyd J) (“IPCom 1”); IPCom GmbH & Co KG v HTC Europe Co. Limited and others [2013] EWHC 2880 (Ch) (Roth J) (“IPCom 2”); TQ Delta llc v Zyxel Communications UK Ltd and another [2018] EWHC 1515 (Ch); [2018] Bus LR 1544 (Henry Carr J); Infederation Limited v Google LLC and others [2020] EWHC 657 (Ch) (Roth J); Anan Kasei Co., Limited and another v Neo Chemicals & Oxides (Europe) Limited [2020] EWHC 2503 (Pat) (Marcus Smith J).

Drawing together the principles at paragraph 39 of the Judgment, Floyd LJ identified the following non-exhaustive list of points of importance from the authorities:

i) In managing the disclosure of highly confidential information in intellectual property litigation, the court must balance the interests of the receiving party in having the fullest possible access to relevant documents against the interests of the disclosing party, or third parties, in the preservation of their confidential commercial and technical information: Warner Lambert at page 356; Roussel at page 49.

ii) An arrangement under which an officer or employee of the receiving party gains no access at all to documents of importance at trial will be exceptionally rare, if indeed it can happen at all: Warner Lambert at page 360: Al Rawi at [64].

iii) There is no universal form of order suitable for use in every case, or even at every stage of the same case: Warner Lambert at page 358; Al-Rawi at [64]; IPCom 1 at [31(ii)].

iv) The court must be alert to the fact that restricting disclosure to external eyes only at any stage is exceptional: Roussel at [49]; Infederation at [42].

v) If an external eyes-only tier is created for initial disclosure, the court should remember that the onus remains on the disclosing party throughout to justify that designation for the documents so designated: TQ Delta at [21] and [23].

vi) Different types of information may require different degrees of protection, according to their value and potential for misuse. The protection to be afforded to a secret process may be greater than the protection to be afforded to commercial licences where the potential for misuse is less obvious: compare Warner Lambert and IPCom 1; see IPCom 2 at [47].

vii) Difficulties of policing misuse are also relevant: Warner Lambert at 360; Roussel at pages 51-2.

viii) The extent to which a party may be expected to contribute to the case based on a document is relevant: Warner Lambert at page 360.

ix) The role which the documents will play in the action is also a material consideration: Roussel at page 49; IPCom 1 at [31(ii)];

x) The structure and organisation of the receiving party is a factor which feeds into the way the confidential information has to be handled: IPCom 1 at [33].

He added to this list the fact that the court must be alert to potential misuse of the ability to designate documents as confidential (and thus restrict access) and stressed that parties should only designate materials as AEO if there were solid grounds for such restriction. The exercise undertaken by the first instance judge to assess what measure of restriction is justified involves a judgment of the kind which an appellate court will not interfere with “unless the judge took into account anything which he ought not to have taken into account or that he left out of account anything which he ought to have taken into account, or that he erred in principle … [or that he was] plainly wrong” from Roussel in the Court of Appeal at page 56 lines 16-19, per Buckley LJ.

Decision on the Xiaomi and Oppo appeals

Xiaomi’s appeal challenging the AEO status wholesale was dismissed. Xiaomi had argued that the test that should have been applied to determine whether an AEO designation was justified was to assess whether nothing short of an AEO designation was sufficient to protect the confidentiality of the documents. The court disagreed, holding that the appropriate test (as adopted by the first instance judge) was to examine the claim to confidentiality over the documents in question in light of the severity of the confidentiality restrictions being contended for. Unlike Oppo, Xiaomi had not explained what documents it actually needed to see as a result of the initial filtering by its lawyers and experts. And the fact that Oppo had obviously considered the remaining AEO documents (which included a number of assignment documents rather than licences) but not considered them sufficiently relevant to their case to challenge them led the court to conclude that it should not interfere with the judge’s decision.

Xiaomi’s final ground of appeal was that the Judgment below meant that their confidentiality club members had to give an undertaking to the counterparties of the re-designated documents without knowing who they were first (as the identities were confidential) and the undertaking was “not at any time to participate in or advise upon any licencing negotiations or licencing litigation involving [the counterparty] or its subsidiaries or affiliates on the one hand and the [Xiaomi Defendants] or [their] subsidiaries or affiliates on the other”.

Sisvel and Mitsubishi had proposed before the appeal that this could be addressed by the Court ordering the disclosure of the parties’ names and that the undertaking they give to the counterparty be that that they would not participate in or advise upon any licensing negotiations with those counterparties (or their subsidiaries or affiliates) for the period of a minimum of 1 year after he or she ceases to be in possession of any of the Re-Designated Agreements.

The court added a clarification to that in paragraph 113 of the judgment, such that the undertaking proposed would make it clear that that the representatives can be involved in settlement negotiations as a result of FRAND litigation. With that clarification the proposed terms were to be substituted for the relevant paragraph in the judge’s order.

The court also dismissed Oppo’s appeal on the basis that the application before the first instance judge had been for Oppo’s licence negotiators to be accepted into the Highly Confidential club and to have access to the wide class of all documents designated as Highly Confidential. For the appeal hearing it became clear that Oppo was content to restrict access of those nominees only to the 6 de designated documents and 1 Highly Confidential document. However, no application on this basis had been before the first instance judge. In the circumstances, Sisvel and Mitsubishi responded to Oppo’s changed position prior to the hearing by indicating that they would not oppose an order that permitted the 7 documents to be disclosed to Oppo’s existing proposed representatives on the following terms: (a) the representatives to provide an undertaking directly to the counterparties not to engage in licensing negotiations with them; (b) the names of the counterparties to be disclosed to Oppo on a confidential basis such that the representatives knew who they would be providing the undertakings to; (c) the undertaking to be limited temporally; and (d) the removal of the restriction against “licencing litigation” with the counterparties which had been included in the first instance order.

The court found that Oppo’s appeal fell away in its entirety as an application on the narrower basis would have raised new considerations which did not undermine the judge’s decision, but concluded that if Sisvel and Mitsubishi’s proposals did not resolve the issue the parties could return to court.

Commentary

The speed at which this case was expedited on appeal, with the hearing taking place less than a month from the first instance decision, demonstrates how flexible the Court of Appeal can be when the matter on appeal requires speedy resolution (provided of course there is space in the Court of Appeal diary).

This decision is also likely to be welcomed by companies considering litigating in the English Courts but concerned that some of the commentary surrounding, in particular the TQ Delta case (referred to above), would mean that an external eyes only regime would no longer be possible to protect their most valuable commercial secrets which may become disclosable in the litigation. This will also assist in applications for disclosure in foreign jurisdictions for use of the documents in English proceedings, as it is often necessary to demonstrate to the foreign court that the confidentiality regime which will be applied will be sufficiently rigorous to protect the information that is the subject of the application. The clear summary of the sort of facts and circumstances which are required to support a an external eyes only designation will also assist practitioners in deciding whether to request such a designation in their case and guide them in the evidence which should be produced to support it.

Jane Mutimear is a partner at Bird & Bird LLP who acted for Mitsubishi and Sisvel in the action, instructing Sarah Abram and Michael Conway.