Can Confidentiality Club have documents for "legal eyes only"?: Delhi High Court answers

The Delhi High Court has ruled that unless mutually agreeable, Confidentiality Club cannot grant access to information to a party's counsel while making the same inaccessible to the party itself.
Can Confidentiality Club have documents for "legal eyes only"?: Delhi High Court answers
Delhi High Court

The Delhi High Court has ruled that unless mutually agreeable, a Confidentiality Club under its Original Side Rules cannot be constituted in a manner that grants access to information to a party's counsel and experts while making the same inaccessible to the party itself. (Interdigital Technology Corporation vs Xiaomi Corporation)

Such an arrangement, the Court has held, is unacceptable and grossly unfair.

The judgment was passed by a Single Judge Bench of Justice C Hari Shankar in Interdigital Technology Corporation (plaintiff)’s patent infringement suit against Xiaomi Corporation (defendant).

Justice C Hari Shankar
Justice C Hari Shankar

The plaintiff alleged the infringement of its Standard Essential Patents (SEPs) by the defendant. It sought directions to either permanently injunct defendant from infringing the SEPs or in the alternative, to direct Xiaomi to take a license for usage of its SEPs on Fair, Reasonable and NonDiscriminatory (FRAND) terms, as decided by the Court.

Along with the infringement suit, the plaintiff also filed an application under Chapter VII Rule 17 of the Delhi High Court (Original Side) Rules, 2018 for the constitution of a Confidentiality Club.

While both the sides agreed to the constitution of the Club, the defendant raised an objection with respect to the structure of the Confidentiality Club as sought by the plaintiff.

The plaintiff proposed setting up of a “two-tier” Confidentiality Club, comprising an “outer tier” and an “inner tier”.

It was suggested that while “confidential information” would be open to all the members of the “outer tier”, certain documents denoted as “Legal Eyes Only (LEO) Confidential Information” would be accessible to members of “inner tier” alone. Consequently, the parties, as well as their officials and employees, would have no access to the “inner tier” documents.

This inner tier was to comprise of third-party license agreements for the purposes of determination of FRAND terms.

Plaintiff stated that this arrangement/protocol was accepted and recognized by courts all over the world. It was argued that it was not necessary that all information be disclosed to the parties or their personnel and the “two-tier” arrangement being reciprocal in nature, would equally benefit the defendant.

The defendant, on the other hand, contended that granting access to advocates and experts was no substitute for granting access to the parties themselves. It was added that the club was against the principle that an advocate could act only on the instructions of his client.

What the Delhi High Court held

The Court, at the very outset, observed that when a party is unwilling, a court had no power to impose contractual conditions which would restrain a counsel from disclosing material information to his/her client.

The jurisprudence of natural justice, due opportunity and fair play has, in this country, its own distinct contour and complexion. The request of InterDigital has to be gauged and assessed in the backdrop of “fair play jurisprudence”, as it exists in India. The mere fact that courts, overseas, may have acquiesced to the setting up of such Confidentiality Clubs cannot, in my view, be of any substantial significance, in deciding the present application of InterDigital.”

The Court noted that Rule 17 in Chapter VII of the Original Side Rules marked a departure from the regime of complete transparency as it allowed "limited access" to certain documents/information.

The raison d’etre of this limited access, the Court recorded, was to limit "public access" and not the opposite party's access to the documents and material.

It thus remarked,

"Can InterDigital, simply put, assert that Xiaomi does not need to see a document on which InterDigital places reliance, to contest the case initiated by it against Xiaomi? The answer, in my view, has unexceptionably to be in the negative."

The Court opined that keeping third-party license agreements in the “inner tier” would be completely antithetical to and destructive of the most fundamental notions of natural justice and fair play as without access to these documents, the defendant would not be able to negotiate the FRAND terms.

"Fair opportunity, to the defendants, in my view, cannot be said to be granted, if the defendants are not allowed access to the third-party license agreements, which constitute the very basis for the allegedly FRAND rate proposed by the plaintiffs. The business interests of InterDigital, howsoever legitimate, cannot prevail over the paramount consideration of grant of fair opportunity, and natural justice, to Xiaomi, to meet the case set up by InterDigital. The choice, between these two competing considerations, in my view, is Hobsonian in nature.", the court recorded.

Further stressing on the importance of client-lawyer relationship, the Court held that in Indian law, SEP infringement litigation was not sui generis so as to justify any deviation from Bar Council of India Rules and the law laid down by the Supreme Court.

"..there can be no question of this Court lending its approval to any arrangement in which the third party license agreements , constituting the very basis of the case set up by InterDigital against Xiaomi, remain undisclosed to Xiaomi, as well as its officials and personnel, and are shown only to advocates (who are not in-house counsel) and experts. Any such arrangement would violate the provisions of the Bar Council Rules as well as the law laid down in various decisions..", the court noted.

In its judgement, the Court nonetheless clarified that the parties were free to "mutually" arrive at any reciprocal arrangement to keep documents away from the eyes of the opposite party.

Ultimately, the court refused to constitute the "two-tier" Confidentality Club being sought by the plaintiff.

The Court allowed the plaintiff to redact information that it thought was confidential and could not be disclosed to any third party. It added that once redacted, the plaintiff would not be permitted to rely on the same.

Advocate Pravin Anand with Advocates Vaishali Mittal, Siddhant Chamola and Pallavi Bhatnagar appeared for plaintiff.

Advocate Saikrishna Rajagopal with Advocates Siddharth Chopra, Arjun Gadhoke, Sneha Jain, Garima Sahney, Anu Paarcha, Victor Vaibhav Tandon and Charu Grover appeared for the defendant.

Read the Judgement:

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