Protecting secrets during inspections

A new decision by Germany’s Federal Supreme Court handed down in November 2009 sheds further light on what measures may be taken to protect the confidentiality interests of parties affected by court orders authorising the inspection of devices on their business premises.

Prior to the court’s Faxkarte decision in 2002, patent owners had a slim chance of successfully asserting a claim for inspection of a device that they alleged infringed a patent. Until Faxkarte, German courts only granted the statutory claim for inspection if the patent owner could establish “a high likelihood” of patent infringement. If there was considerable doubt whether one or two features of a patent claim were realised, a claim for inspection was almost bound to fail.

Faxkarte changed the situation in that the threshold for inspection claims was lowered to “a certain likelihood” of infringement. Two years later, the European Enforcement Directive instructed the member states to introduce means for inspecting goods, which Germany implemented with a new Section (140c) of its Patent Act.

On the basis of Faxkarte, and before the statutory provisions became the law, German patent infringement courts, especially the Düsseldorf District Court, developed a kind of standard ex parte inspection proceeding in which an expert (e.g. a patent attorney with no affiliation with either party) is appointed to inspect the device in question and draft a technical opinion on whether this device infringes the patent in suit, and the potential infringer (or a third party using the device) is ordered to tolerate the expert and the applicant’s attorneys entering his business premises for the inspection.

The interests of the inspected party may be adversely affected because the patent owner or his representatives gain access to the business premises where they may ‘freely’ take note of potential trade secrets.

Whether on the basis of the Faxkarte decision or the Patents Act, the courts have to balance the interests of the patent owner to obtain as much information about the alleged infringement against the interests of the alleged infringer to have his confidential business information protected. The court has to take such measures it deems fit to protect such alleged confidential information.

“The courts have to balance the interests of the patent owner to obtain as much information about the alleged infringement against the interests of the alleged infringer to have his confidential business information protected. The court has to take such measures it deems fit to protect such alleged confidential information.”

One of these measures is that the written opinion, or certain parts of it, of the expert who inspects the device may be ordered to be disclosed to the patent owner’s attorneys only and not to the patent owner. The restricted disclosure must be explicitly applied for; the court cannot use its discretion to order a limited disclosure to attorneys if the owner wants full disclosure.

Only if the potential trade secrets of the alleged infringer and their value in the market are vitally important can the court decline to disclose all the facts of the infringement. In such a situation, the patent owner may request that the information is disclosed to his attorneys only.

The court will grant such restricted disclosure if the information contained in it is of a nature that enables the attorney to communicate the result of the opinion (and exercise his contractual duty to advise his client properly) without disclosing the trade secrets.

Such restricted disclosure of the expert opinion is certainly better than no disclosure at all. It may still be of use to the patent owner because the attorney who has knowledge of the entire opinion may—without disclosing its relevant parts to his client—advise his client on whether it makes sense to continue asserting claims for patent infringement or not.

A German attorney is bound by the non-disclosure order; not obeying it would result in the criminal offence of ‘disclosure of secrets’. This criminal offence was one of the reasons why the Federal Supreme Court deemed the non-disclosure order against the attorneys an effective measure to protect the secrecy interests of the party concerned.

The court explained in detail why a German attorney who is under a nondisclosure obligation towards his own client is not put in conflict with his client’s interests. He still is exclusively the representative of his client’s interests, but his duties towards his client are restricted by the court. Therefore, the Federal Supreme Court holds that a non-disclosure order is lawful and covered by the statute’s authorisation to take the necessary measures to protect third parties’ secret business information.

Jens Künzel, LLM, is a partner at Krieger Mes & Graf v. der Groeben. He can be contacted at: jens.kuenzel@krieger-mes.de