TQ Delta LLC v Zyxel Communications UK Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henry Carr |
| Judgment Date | 13 June 2018 |
| Neutral Citation | [2018] EWHC 1515 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HP-2017-000045 |
[2018] EWHC 1515 (Ch)
Mr. Justice Henry Carr
Case No: HP-2017-000045
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Mr. Nicholas Saunders QC (instructed by Gowling WLG (UK) LLP) for TQ Delta LLC
Mr. Iain Purvis QC (instructed by Pinsent Masons LLP) for the Zyxel Communications UK Limited
Introduction
This a patent claim in respect of two patents which, according to the Claimant (“TQ Delta”) are “ essential” in that the relevant Recommendations cannot be practiced without infringement of the patents. The claim involves, as is normally the case, technical issues of validity and infringement and whether the patents are in fact essential, as well as non-technical issues which in these proceedings have been referred to as “ reasonable and non-discriminatory licences and remedies” (“RAND”).
The patents in suit are just two of TQ Delta's patents from within a substantial portfolio of patents which are DSL related, which it acquired from a company known as Aware Inc. in 2012. DSL technologies are those commonly used to provide fixed line broadband internet to residential and commercial premises. DSL technology is prescribed by internationally recognised technical standards which allow for interoperability between DSL products. The standards relevant to this dispute are known as ITU recommendations.
The Defendants (“Zyxel”) are part of the world wide Zyxel group of companies which is responsible for manufacturing and selling various types of DSL compliant equipment. Because the patents have been declared essential to the implementation of certain ITU Recommendations, in accordance with ITU policy, TQ Delta is required to license the patent on a RAND basis.
It is common practice in patent cases for the parties to reach a Confidentiality Club Agreement, whereby access to confidential documents is restricted to named individuals on provision of appropriate confidentiality undertakings. This judgment concerns a dispute which has arisen between the parties over the terms of the Confidentiality Club Agreement. The Agreement proposed by TQ Delta differentiates between “ Confidential Information” and “ Highly Confidential Information”. If the disclosing party designates any information or document produced on disclosure as being Highly Confidential its disclosure is limited to “ external eyes only” i.e. to external solicitors, counsel and independent experts. Zyxel objects to inclusion of an external eyes only tier in the Agreement and claims that it is necessary for two named individuals from the Zyxel group to have access to such documents.
This is the second dispute that I have heard in the last few days concerning external eyes only categorisation of documents. This indicates that external eyes only categorisation, either in confidentiality agreements or in disclosure lists, is not confined to this case. For this reason, having given an unreserved judgment, I indicated that I would supplement the reasons for my conclusion in this approved judgment.
The practice of external eyes only designation
TQ Delta submitted that external eyes only designation is a relatively common feature of patent litigation in this jurisdiction. It referred to the judgments of Floyd J in IPCom GmbH & Co KG v HTC Europe Co. Limited and others [2013] EWHC 52 and Birss J in Unwired Planet [2017] EWHC 3083. It suggested that that its approach mirrors that adopted in the Unwired Planet litigation, which allowed that case to proceed in a practical manner. It suggested that the same approach has been used in FRAND arbitrations. Furthermore, it pointed out that in related litigation between the parties in the United States, certain documents have been provided on an attorney's eyes only basis.
Proceedings in the High Court are public, in accordance with the principle of open justice. Confidentiality arrangements in arbitration proceedings may well be different, as such proceedings may be heard in private. No evidence was provided about the legal basis or reasons for attorney's eyes only restrictions in the United States. Furthermore, it was like cells evidence that the US scheme allows attorneys eyes only designation is to be challenged and like cells US attorneys have confirmed that they will make an application to lift the restriction if it is not lifted voluntarily.
I did not find the references to arbitration proceedings or to United States proceedings to be of assistance. However the IPCom and Unwired Planet decisions require more detailed consideration.
The IPCom decision
In IPCom Floyd J set out the applicable principles at [15] – [21] of. He referred to the judgment of Lord Dyson JSC in Al Rawi v Security Service [2011] UKSC 34; [2012] 1 AC 531, who said at [12]:
“… trials are conducted on the basis of the principle of natural justice. There are a number of strands to this. A party has a right to know the case against him and evidence on which it is based. He is entitled to have the opportunity to respond to any such evidence and to any submissions made by the other side. The other side may not advance contentions or adduce evidence of which he is kept in ignorance.”
There is a recognised exception to this rule, to which Lord Dyson referred at [64]:
“Similarly, where the whole object of the proceedings is to protect a commercial interest, full disclosure may not be possible if it would render the proceedings futile. This problem occurs in intellectual property proceedings. It is commonplace to deal with the issue of disclosure by establishing ‘confidentiality rings’ of persons who may see certain confidential material which is withheld from one or more of the parties to the litigation at least in its initial stages. Such claims by their very nature raise special problems which require exceptional solutions.”
However, in the same paragraph, Lord Dyson emphasised that it would be unprecedented to conduct a trial where one party was denied access to material relied upon by the opposite party.
“I am not aware of a case in which a court has approved a trial of such a case proceeding in circumstances where one party was denied access to evidence which was being relied on at the trial by the other party.”
In IPCom, Floyd J also referred to the judgment of Buckley LJ in Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 where it was contemplated that a party might not be given access to highly technical confidential information on which he could not form his own view, and would have to rely on experts, at an interim stage. Buckley LJ observed:
“Even so, if the action were to go to trial, it would seem that sooner or later the party would be bound to learn the facts, unintelligible though they might be to him, unless the very exceptional course were taken of excluding him from part of the hearing. Even where the information is of a kind the significance of which the party would himself be able to understand, it may nevertheless be just to exclude him, at any rate during the interlocutory stages of the action, from knowing it if he is a trade competitor of his opponent.”
The Warner-Lambert case concerned trade secrets at the higher end of the scale of sensitivity. Nonetheless, the Court of Appeal rejected the Defendant's argument that information should be disclosed on an external eyes only basis even at the interim stages of the claim. They ordered that disclosure be provided to the Claimant's Chairman, so that proper instruction could be given by the Claimant to its lawyers on the basis of informed advice [360 line 47 – 361 line 13].
Floyd J also cited Roussel Uclaf v Imperial Chemical Industries plc [1990] RPC 45, where Aldous J said at first instance:
“Each case has to be decided on its own facts and the broad principle must be that the court has the task of deciding how justice can be achieved taking into account the rights and needs of the parties. The object to be achieved is that the applicant should have as full a degree of disclosure as will be consistent with adequate protection of the secret. In so doing, the court will be careful not to expose a party to any unnecessary risk of its trade secrets leaking to or being used by competitors. What is necessary or unnecessary will depend upon the nature of the secret, the position of the parties and the extent of the disclosure ordered. However, it would be exceptional to prevent a party from access to information which would play a substantial part in the case as...
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