SEPs: Secrets solution?
Many, if not most, patent litigation suits are the result of a breakdown in licensing discussions between the rights owner and the implementer. Standard-essential patents (SEPs) litigations are, perhaps, the poster child for this failure.
Without trivialising the complexities involved SEP litigations, the fundamental underlying dispute in an SEP litigation hovers around whether the patents in question are essential to a standard, and what an obligation to license the technology on fair, reasonable and non-discriminatory (FRAND) terms entails.
When dealing with the latter situation, the SEP holders and the implementers are at different price-points in their interpretation of the FRAND obligation and, increasingly, the breakdown leads to a SEP litigation.
Once initiated, the parties and, more particularly, the implementer jostle on the applicable royalty rates. One theory that has evolved in recent years is the understanding that FRAND obligations of SEP holders must be driven by comparable licences, ie, licences taken by other parties, and the defendant/implementer should be given the benefit of the existing licences to even their business playing field.
This results in a requirement that the SEP holder shares information relating to the comparable licences so that it can establish that its licence offer to the defendant/implementer meets its FRAND obligation.
Consequently, and noting that the productiveness of such an exchange can be debated, patent jurisprudence has created mechanisms to preserve confidentiality of information and ensure that exchange of such information takes place while balancing the interests of both parties.
Procedurally, a ‘confidentiality’ or ‘external eyes only’ club is created by a court to restrict access of confidential information to a select group (the ‘club’) of individuals. The club typically comprises outside counsel and external representatives of the parties to a litigation, who review the information and advise their clients so that a speedy resolution can be reached.
If only things were that simple.
Clubs in India: the beginnings
In the recent years, confidentiality clubs have gained prominence in patent litigation in India, especially in SEP litigation and what has emerged is a diverging school of thought from the judiciary.
Being a fairly new concept in Indian jurisprudence, the first decision in India involving the creation of a confidentiality club in an IP matter occurred in 2012. In MVF 3 APS & Ors v M Sivasamy and Ors, a case related to infringement of copyright and breach of confidentiality vis-à-vis trade secrets, the Delhi High Court needed to come up with a mechanism to manage the confidential documents that were to be filed under sealed covers/boxes with the registrar, based on directions issued by a UK court where the parties were also locked in a battle.
A club was constituted with counsels of both parties who were bound by confidentiality and given access to the documents, in camera, or in the judge’s chambers.
Taking this a step further, proactively, the Delhi High Court promulgated its Original Side Rules, 2018, and specifically allowed for creation of confidentiality clubs. These rules do not require a specific constitution of the club, and it is left to the parties to come up with a framework of the constituent members.
However, by way of an illustrative structure, the rules suggest that only advocates, who are not, and have not been, in-house lawyers of either party and external experts should be members of the confidentiality club.
