Confidentiality - Optis Cellular Technology v Apple Retail
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On 23 Oct 2021, I discussed Mr Justice Meade's judgment in Optis Cellular Technology LLC and others v Apple Retail UK Ltd and others [2021] EWHC 1739 (Pat) (25 June 2021). That had been "trial B" in a series of trials between the owners of certain telecommunications patents and Apple Inc and its subsidiaries. This case was an application in a case management conference before Mr Justice Marcus Smith for trial "E". It did not involve the claimants who were allowed to withdraw from the hearing. It lay between the defendants and a company known only as "the third party."
The Application
The defendants applied for an order that a licence with the third party be provided for inspection to the claimants in accordance with the terms of a confidentiality ring. A confidentiality ring comprises persons to whom documents containing confidential information may be disclosed on the basis of their undertakings to preserve confidentiality" (see para 34 of the Technology and Construction Court Guide). The defendants also sought an anonymity order for the preservation of the confidential aspects of the application, including the agreement and the identity of the third party. The third party resisted both parts of the application strenuously.
Reason for the Application
The defendants wanted to introduce the licence into evidence because courts rely on comparators when settling licence fees and other terms in FRAND cases. However, the licence agreement upon which the defendants wanted to rely contained the following clause:
"8.1 The terms of this Agreement and all correspondence and information relating to this Agreement are strictly confidential. The Parties shall keep the terms of this Agreement, and all correspondence and information relating to this Agreement, strictly confidential and no Party shall now, or hereafter, disclose the same to any third party except
(a) with the prior written consent of the other Party;
(b) as may be required by applicable law, regulation or order of the governmental authority of competent jurisdiction (but for the avoidance of doubt) not including filings allowed but not required by any such law, regulation or order;
(c) during the course of litigation or arbitration, so long as the disclosure of such terms and particulars is subject to the most highly confidential restrictions available to litigating party or parties involved in such arbitration, such restrictions are embodied in a court-entered or arbitration-entered protective order, limiting disclosure to outside counsel, and such disclosing Party provides the other Party written notice at least ten (10) business days prior to such disclosure;
(d) in confidence to the professional, legal or financial counsel representing each such Party;
(e) in confidence on terms no less protective than those contained herein to acquirers (including prospective acquirers) of Divested Patents solely to the extent reasonably necessary for explaining the scope of the releases, licences or covenants granted herein; or
(f) in confidence to any party covered by the releases, licences or covenants granted herein save as to the scope of the releases, licences and covenants contained herein.
With respect to the foregoing (e), such disclosing Parties shall, to the extent legally permissible, provide the other Party with prior written notice of such applicable law, regulation or order, and use reasonable efforts to limit the disclosure in terms and conditions of this agreement, or other confidential information of such other Party to the information set forth in Annex B that is expressly required for disclosure in such instance and to obtain a protective order or other confidential treatment with respect thereto and comply with all legal requests of the other Party in connection therewith, in each case in accordance with the applicable law, regulations and orders.
8.2 Neither Party shall issue a press release, seek publicity or make any other public statement regarding this Agreement without the prior written approval of the other Party, including initiating or responding to an inquiry by the press concerning the other Party, its products or services or the agreement, its terms or negotiation. A Party that proposes to issue a press release or other public statement regarding this agreement must send such proposed release or statement to the other Party, who will review at least three (3) days in advance of the proposed release or statement, and must receive the written approval of such other Party prior to issuing such press release or public statement."
"8.1 The terms of this Agreement and all correspondence and information relating to this Agreement are strictly confidential. The Parties shall keep the terms of this Agreement, and all correspondence and information relating to this Agreement, strictly confidential and no Party shall now, or hereafter, disclose the same to any third party except
(a) with the prior written consent of the other Party;
(b) as may be required by applicable law, regulation or order of the governmental authority of competent jurisdiction (but for the avoidance of doubt) not including filings allowed but not required by any such law, regulation or order;
(c) during the course of litigation or arbitration, so long as the disclosure of such terms and particulars is subject to the most highly confidential restrictions available to litigating party or parties involved in such arbitration, such restrictions are embodied in a court-entered or arbitration-entered protective order, limiting disclosure to outside counsel, and such disclosing Party provides the other Party written notice at least ten (10) business days prior to such disclosure;
(d) in confidence to the professional, legal or financial counsel representing each such Party;
(e) in confidence on terms no less protective than those contained herein to acquirers (including prospective acquirers) of Divested Patents solely to the extent reasonably necessary for explaining the scope of the releases, licences or covenants granted herein; or
(f) in confidence to any party covered by the releases, licences or covenants granted herein save as to the scope of the releases, licences and covenants contained herein.
With respect to the foregoing (e), such disclosing Parties shall, to the extent legally permissible, provide the other Party with prior written notice of such applicable law, regulation or order, and use reasonable efforts to limit the disclosure in terms and conditions of this agreement, or other confidential information of such other Party to the information set forth in Annex B that is expressly required for disclosure in such instance and to obtain a protective order or other confidential treatment with respect thereto and comply with all legal requests of the other Party in connection therewith, in each case in accordance with the applicable law, regulations and orders.
8.2 Neither Party shall issue a press release, seek publicity or make any other public statement regarding this Agreement without the prior written approval of the other Party, including initiating or responding to an inquiry by the press concerning the other Party, its products or services or the agreement, its terms or negotiation. A Party that proposes to issue a press release or other public statement regarding this agreement must send such proposed release or statement to the other Party, who will review at least three (3) days in advance of the proposed release or statement, and must receive the written approval of such other Party prior to issuing such press release or public statement."
The defendants could not use the licence without breaching the clause unless the court released them from their contractual obligation and duty of confidence.
Disclosure
The learned judge drew a distinction between disclosure and inspection. In his view, the claimants needed to know of the existence of the licence agreement. He ordered it to be disclosed to the claimants in the following terms:
"A licence between Apple and [the Third Party], dated 11 February 2021, that covers [the Third Party's] 3G, 4G and 5G technologies."
"A licence between Apple and [the Third Party], dated 11 February 2021, that covers [the Third Party's] 3G, 4G and 5G technologies."
His lordship held that such disclosure was justified for two reasons:
"i) First of all, it is not a breach because there exists the prior consent of the other party within clause 8.1. I make it clear, for the avoidance of doubt, that this consent needs to be reflected in a recital in the order consequential on this hearing, namely that the consent of the Third Party has been given. It seems to me that, given the provisions in clause 8.1, there should be a three-day delay between the making of this order (with the Third Party's consent) and the disclosure of the Licence in the terms that I have described.
ii) Secondly, I want to make it clear, again, to ensure that Apple's position is protected, that I am ordering disclosure in those terms. That, I think, means that there will be protection to Apple in the unlikely event that the Third Party were to say the disclosure should not be given. Given the consent that has already been forthcoming, that is highly unlikely, but I think that Apple are entitled to the benefit of a protection of an order of the court that disclosure in those terms be made."
"i) First of all, it is not a breach because there exists the prior consent of the other party within clause 8.1. I make it clear, for the avoidance of doubt, that this consent needs to be reflected in a recital in the order consequential on this hearing, namely that the consent of the Third Party has been given. It seems to me that, given the provisions in clause 8.1, there should be a three-day delay between the making of this order (with the Third Party's consent) and the disclosure of the Licence in the terms that I have described.
ii) Secondly, I want to make it clear, again, to ensure that Apple's position is protected, that I am ordering disclosure in those terms. That, I think, means that there will be protection to Apple in the unlikely event that the Third Party were to say the disclosure should not be given. Given the consent that has already been forthcoming, that is highly unlikely, but I think that Apple are entitled to the benefit of a protection of an order of the court that disclosure in those terms be made."
However, disclosure did not entitle the claimants to inspect the document. Should they ever want to inspect it, they could make a further application to which the third party would be a respondent.
The Real Issue
Although it had been framed as an application for the production of the licence agreement for inspection to the confidentiality ring, the judge said that the real issue was whether the defendants were entitled to look at, or (more precisely) to show the agreement to their experts. He said at para [28] of his judgment:
"The question is whether, in framing their own case, Apple should be released from obligations of confidentiality that they have willingly entered into in a licence that postdates the disclosure regime in this litigation."
"The question is whether, in framing their own case, Apple should be released from obligations of confidentiality that they have willingly entered into in a licence that postdates the disclosure regime in this litigation."
Determining the Issue
In order to decide the issue, the judge took account of the following factors at para l34]:
"i) Significant weight must be attached to the confidentiality obligations which one party (here Apple) has assumed in the Licence to the Third Party. In particular, the Licence was entered into after the disclosure process had begun. In short, these obligations were assumed in circumstances where the need to deploy this Licence in this litigation was known to Apple (at least as an organisation, and without going into questions of specific attribution of knowledge).
ii) Optis, as I have noted, has expressed no interest in seeing the Licence.
iii) I cannot be satisfied that the Licence is as relevant and important to the comparables as Apple say it is. Indeed, Apple could not itself articulate precisely how the Licence would fit into the process it was proposing to undertake. The fact is that the process of articulation of the case on comparables and on FRAND rates is in its early stages, and will only culminate in a presentation of case, including evidence, at the end of November of this year. By that stage, by my orders, both Apple and Optis will have put all of their cards on the table and will have articulated, with all the supporting evidence, exactly what their case, amongst other things, on FRAND rates, actually is. It follows that I am in no position to understand precisely how Apple is putting its comparables case. Apple may have a better understanding than me or Optis, but I accept that even they are in the early stages of working out what their case is. I do not consider that Apple can plausibly say more than that their experts would like to see the Licence in order to work out whether it may assist Apple's case. This is a very low order of relevance or materiality to the comparables process."
"i) Significant weight must be attached to the confidentiality obligations which one party (here Apple) has assumed in the Licence to the Third Party. In particular, the Licence was entered into after the disclosure process had begun. In short, these obligations were assumed in circumstances where the need to deploy this Licence in this litigation was known to Apple (at least as an organisation, and without going into questions of specific attribution of knowledge).
ii) Optis, as I have noted, has expressed no interest in seeing the Licence.
iii) I cannot be satisfied that the Licence is as relevant and important to the comparables as Apple say it is. Indeed, Apple could not itself articulate precisely how the Licence would fit into the process it was proposing to undertake. The fact is that the process of articulation of the case on comparables and on FRAND rates is in its early stages, and will only culminate in a presentation of case, including evidence, at the end of November of this year. By that stage, by my orders, both Apple and Optis will have put all of their cards on the table and will have articulated, with all the supporting evidence, exactly what their case, amongst other things, on FRAND rates, actually is. It follows that I am in no position to understand precisely how Apple is putting its comparables case. Apple may have a better understanding than me or Optis, but I accept that even they are in the early stages of working out what their case is. I do not consider that Apple can plausibly say more than that their experts would like to see the Licence in order to work out whether it may assist Apple's case. This is a very low order of relevance or materiality to the comparables process."
The Decision
Upon weighing those factors the judge refused the defendants' application. He said at [35]:
"It seems to me that Apple must come with far more justification in order for me to override the clear and strict provisions of confidentiality that exist in clause 8.1, and which the Non-Litigating Counterparty to the Licence is asserting"
"It seems to me that Apple must come with far more justification in order for me to override the clear and strict provisions of confidentiality that exist in clause 8.1, and which the Non-Litigating Counterparty to the Licence is asserting"
Mr Justice Marcus Smith did not exclude the possibility of a further application. He added that though he was shutting the door pretty firmly he was not closing it absolutely. He was prepared to entertain a future application from Apple seeking in effect permission to deploy the licence at some point. Were such an application to be made, he would expect a statement by an expert, supported by the usual undertakings that an expert gives when making a report, setting out why this particular agreement is so important to Apple's case that it justifies a release from the burdens and obligations of clause 8.1.
He indicated that were the claimants to seek inspection of the licence the position would be different. He would be minded to accede much more freely to the inspection of the licence, albeit in redacted terms, into the relevant confidentiality ring.
The judge also refused to make an anonymity order for the following reason:
"I am entirely satisfied that this redaction to the judgment is appropriate. What I am not going to do is make an order for anonymity. The reasons for this, it seems to me, are quite clear. Whilst the court is prepared to take certain steps, almost automatically (but only for good reason), to protect matters of confidence – they include confidentiality rings, redaction, considering very carefully whether disclosure should be ordered at all – a positive order requiring third parties to the litigation not to say a particular name or use particular information is, as it seems to me, something that requires justification going well beyond the mere question of commercial confidentiality. There is, I am afraid, a certain price that has to be paid in participating in litigation, even as a defendant, and that price is the fact that the justice process involves public scrutiny so that there can be public confidence in its processes. Whilst certain steps are justifiable in order to ensure that the pain of litigation is minimised and confidential information is protected, it seems to me that it goes far too far to impose an anonymity order, simply to protect commercial confidentiality without more."
He added that an anonymity order, in this case, would be a grave potential inconvenience to the parties, third parties, and to the court.
"I am entirely satisfied that this redaction to the judgment is appropriate. What I am not going to do is make an order for anonymity. The reasons for this, it seems to me, are quite clear. Whilst the court is prepared to take certain steps, almost automatically (but only for good reason), to protect matters of confidence – they include confidentiality rings, redaction, considering very carefully whether disclosure should be ordered at all – a positive order requiring third parties to the litigation not to say a particular name or use particular information is, as it seems to me, something that requires justification going well beyond the mere question of commercial confidentiality. There is, I am afraid, a certain price that has to be paid in participating in litigation, even as a defendant, and that price is the fact that the justice process involves public scrutiny so that there can be public confidence in its processes. Whilst certain steps are justifiable in order to ensure that the pain of litigation is minimised and confidential information is protected, it seems to me that it goes far too far to impose an anonymity order, simply to protect commercial confidentiality without more."
He added that an anonymity order, in this case, would be a grave potential inconvenience to the parties, third parties, and to the court.
Further Information
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