Disclosure - Anan Kasei Co. Ltd v Neo Chemicals & Oxides (Europe) Ltd
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This was a dispute over the terms on which documents containing confidential information relating to the business of the claimants and to two of their trading partners ("Party A" and "Party B") could be disclosed to the defendants. Those documents were:
I. a single (electronic) document called the corrected Sales CM Report that had hitherto been provided to the defendants on an External Eyes Only (EEO) basis.
II. a category of documents comprising the claimants' extended disclosure that had also been supplied to the defendants on an EEO basis.
III. a Supply & Purchase Agreement made between the claimants and Party A
IV. the Party A Licence Agreement, Amendment #1 to the Supply & Purchase Agreement.
The parties were in direct competition in the supply of high surface area cerium oxide for use in catalytic converters. The dispute arose because the defendants insisted on disclosure to their Chief Operating Officer, Kevin Morris. They said that he was the only person in their management team capable of understanding the evidence and therefore the only person capable of instructing their forensic accountants.
The matter came on before Mr Justice Mellor. He heard the parties on 8 Oct 2021 and gave judgment on 22 Oct 2021. At para [4] of his judgment, the learned judge noted that he had to take into account not only the interests and concerns of the parties to the litigation but also those of Parties A and B.
His lordship was able to reach a decision quickly in relation to documents III and IV, namely the Supply & Purchase Agreement and the Party A Licence Agreement. The claimants contended that the Supply & Purchase Agreement was irrelevant and that it could safely be shown to the defendants' counsel and solicitors upon their undertaking not to disclose it to their client. Party A objected on the grounds that there was still a risk that the document would be seen by the defendants. The judge understood the concern but assessed the risk as "fanciful". As for document IV, the parties agreed that a redacted copy could be shown to the defendants including Mr Morris upon his confirmation that he would not be involved in any negotiations or discussions on the pricing or supply of cerium oxide or substitute products.
Before considering the disclosure of documents I and II, Mr Justice Mellor referred to paras [39] and [40] of the judgment of Lord Justice Floyd in Oneplus v Mitsubishi Electric [2020] EWCA Civ 1562:
"[39]. Drawing all this together, I would identify 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].
40. To this I would add that the court must be alert to the misuse of the opportunity to designate documents as confidential. It remains the case that parties should not designate such material as AEO, even initially, unless they have satisfied themselves that there are solid grounds for establishing that restricting them in that way is necessary to protect their confidential content."
I. a single (electronic) document called the corrected Sales CM Report that had hitherto been provided to the defendants on an External Eyes Only (EEO) basis.
II. a category of documents comprising the claimants' extended disclosure that had also been supplied to the defendants on an EEO basis.
III. a Supply & Purchase Agreement made between the claimants and Party A
IV. the Party A Licence Agreement, Amendment #1 to the Supply & Purchase Agreement.
The parties were in direct competition in the supply of high surface area cerium oxide for use in catalytic converters. The dispute arose because the defendants insisted on disclosure to their Chief Operating Officer, Kevin Morris. They said that he was the only person in their management team capable of understanding the evidence and therefore the only person capable of instructing their forensic accountants.
The matter came on before Mr Justice Mellor. He heard the parties on 8 Oct 2021 and gave judgment on 22 Oct 2021. At para [4] of his judgment, the learned judge noted that he had to take into account not only the interests and concerns of the parties to the litigation but also those of Parties A and B.
His lordship was able to reach a decision quickly in relation to documents III and IV, namely the Supply & Purchase Agreement and the Party A Licence Agreement. The claimants contended that the Supply & Purchase Agreement was irrelevant and that it could safely be shown to the defendants' counsel and solicitors upon their undertaking not to disclose it to their client. Party A objected on the grounds that there was still a risk that the document would be seen by the defendants. The judge understood the concern but assessed the risk as "fanciful". As for document IV, the parties agreed that a redacted copy could be shown to the defendants including Mr Morris upon his confirmation that he would not be involved in any negotiations or discussions on the pricing or supply of cerium oxide or substitute products.
Before considering the disclosure of documents I and II, Mr Justice Mellor referred to paras [39] and [40] of the judgment of Lord Justice Floyd in Oneplus v Mitsubishi Electric [2020] EWCA Civ 1562:
"[39]. Drawing all this together, I would identify 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].
40. To this I would add that the court must be alert to the misuse of the opportunity to designate documents as confidential. It remains the case that parties should not designate such material as AEO, even initially, unless they have satisfied themselves that there are solid grounds for establishing that restricting them in that way is necessary to protect their confidential content."
His lordship said at para [24] of his judgment that the parties' positions were entrenched and that they had made little or no attempt to resolve the impasse. The date for the inquiry into the claimants' damages for patent infringement was fast approaching and evidence had to be prepared and exchanged. The judge proposed to analyse the various considerations under the following sub-headings: First, identification of the information in question and assessment of its confidentiality. Second, relevant characteristics of the proposed recipient, Mr Morris, and the risk of misuse. Third, the arguments for and against disclosure to Mr Morris.
The judge assessed the information as highly confidential. He noted that Mr Morris had trained and practised as a lawyer and was conducting the litigation between the parties in several jurisdictions outside the UK as well as in England and Wales. He was not involved in pricing or production but he was still part of the defendants' management. As a lawyer, he would not need to see and might not understand all the information that would be placed before the defendants' forensic accountants. On the other hand, he had already seen some information as a result of earlier disclosure orders.
Mr Justice Melor was not prepared to allow Mr Morris unrestricted access to the information in documents I and II but he seized on the following concession offered by one Bennett on behalf of the claimants at para [51] of his judgment::
"(a) First, he recognised that Mr Morris is aware of the volumes of material Neo supplied to Party B, which Rhodia claims it would have supplied in the counterfactual. Mr Morris is also aware of the range of margins claimed by Rhodia (from what has previously been disclosed to him).
(b) Then, Mr Bennett indicated that Rhodia would be prepared to allow Mr Morris to be informed of the impact on the margins claimed by Rhodia of the fact that the margin information has now been calculated on the basis only of sales to Party B. Mr Bennett says to be informed of that impact, Mr Morris does not need to see all of the materials in dispute.
(c) Furthermore, Mr Bennett says that Rhodia is also prepared to allow Mr Morris to be informed of the impact:
(i) on the claimed margins of the volume-based adjustment to the price charged to Party B, a point explained in Mackay 3; and
(ii) of Rhodia's case on what the volume-based adjustment in the counterfactual would have been on the claimed margins in due course.
(d) Overall, Mr Bennett suggests that this information should allow Mr Morris to assess the margins claimed and to make any settlement offer which Neo may be considering."
"(a) First, he recognised that Mr Morris is aware of the volumes of material Neo supplied to Party B, which Rhodia claims it would have supplied in the counterfactual. Mr Morris is also aware of the range of margins claimed by Rhodia (from what has previously been disclosed to him).
(b) Then, Mr Bennett indicated that Rhodia would be prepared to allow Mr Morris to be informed of the impact on the margins claimed by Rhodia of the fact that the margin information has now been calculated on the basis only of sales to Party B. Mr Bennett says to be informed of that impact, Mr Morris does not need to see all of the materials in dispute.
(c) Furthermore, Mr Bennett says that Rhodia is also prepared to allow Mr Morris to be informed of the impact:
(i) on the claimed margins of the volume-based adjustment to the price charged to Party B, a point explained in Mackay 3; and
(ii) of Rhodia's case on what the volume-based adjustment in the counterfactual would have been on the claimed margins in due course.
(d) Overall, Mr Bennett suggests that this information should allow Mr Morris to assess the margins claimed and to make any settlement offer which Neo may be considering."
He recognized that maintaining EEO protection for the documents and information in dispute was exceptional. That consideration had to be balanced by what he considered to be the exceptionally sensitive nature of the documents and information in question, in terms of whether they should be made accessible to an arch competitor even under the undertakings on offer, and even to a man of Mr Morris's standing and character. His lordship added that those arrangements could be reviewed and modified as the case progressed.
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