Generally, legal proceedings are conducted in an open court and access to documents, information and evidence, is given to all the parties to the litigation and their lawyers. An exception to this rule is a ‘confidentiality club’, set up in cases involving exchange of confidential and commercially sensitive information of the parties to the litigation. Confidentiality clubs are usually set up either by way of an agreement between the parties to the litigation or by an order of the Court, in order to restrict access to confidential documents and information to certain named individuals on the basis of their undertaking of maintaining confidentiality. Confidentiality clubs have become a standard feature in English and American patent litigation and in recent years, have also been set up in India, especially in patent infringement cases.

The need for ‘confidentiality clubs’ necessarily arises in patent infringement and trade secret misappropriation cases where the ultimate adjudication of the dispute depends on the evaluation of evidence presented by the disclosing party, which is confidential in nature and which may give an unfair competitive advantage to the receiving party. Such confidential information may range from manufacturing processes, formulae and source code and may extend to commercially sensitive pricing information and agreements with licensees etc.

A ‘confidentiality club’ usually consists of specified external counsel, technical experts and identified representative(s) of the parties. The members of the ‘confidentiality club’ are bound by an undertaking that they shall not disclose the information which they would be privy to, as a result of disclosures made within the ‘confidentiality club’ and would use the same only for  prosecuting or defending the claims with respect to the litigation, to which it pertains. The proceedings wherein ‘confidentiality clubs’ are set up, are conducted ‘in camera’ and the access to the documents is only granted to the named members of the ‘confidentiality club’.

Another facet of a ‘confidentiality club’ is known as an ‘External Eyes Only’ club (“EEO Club”). The EEO Club typically consists of only the solicitors, external counsel and technical experts. The parties and their representatives are not allowed to be part of the EEO Club. The practice of setting up an EEO Club has been subject to criticism mainly on the grounds that such exercise precludes the participation of a party altogether from a litigation and that the lawyers are constrained to construct arguments and prepare evidence without instructions/inputs from their clients. In a judgment of the Chancery Division in the case of TQ Delta LLC Vs. Zyxel Communications UK Lts and Another[1] Carr J, after analyzing judgments on confidentiality and EEO Clubs, has set out the following guidance points: (i) parties may choose to agree to an ‘external eyes only’ tier; (ii) confidentiality club agreements are often essential in intellectual property cases, which require disclosure of confidential information. In such cases, a regime for disclosure which limits access to sensitive documents to specific individuals within one of the parties, in order to protect confidentiality, is now commonplace; (iii) redactions to documents can be made to exclude material which is confidential and irrelevant to the dispute; (iv) ‘external eyes only’ access to individual documents of peripheral relevance, whose disclosure would be damaging, may be justified in specific cases; (v) the possibility that in certain exceptional cases, ‘external eyes only’ access to specific documents of greater relevance might be justified, at least at an interim stage, cannot be excluded; and (vi) in the absence of exceptional circumstances, each party must be able to see and discuss with its lawyers the relevant parts of the key documents in the case. Carr J. rejected the request for establishment of an EEO club regime in the absence of exceptional circumstances warranting setting up the same.

Courts in India, in the context of patent infringement cases, have allowed setting up of a ‘confidentiality club’ and an EEO Club. The Delhi High Court allowed setting up of an EEO Club in the case of Telefonaktiebolaget LM Ericsson (PUBL) vs Xiomi Technology & Ors[2]. The parties in this case were allowed access to the documents only through the members of the club which consisted of external lawyers and experts of such party.  The Delhi High Court further directed that recording of evidence with respect to the confidential documents/information shall be done in the presence of the members of club only. The Bombay High Court, in the case of Pfizer Inc Vs Unimark Remedies Limited[3] allowed setting up a ‘confidentiality club’ and further ordered that the proceedings shall be held ‘in camera’. However, in the case of Pfizer (supra) some representatives of the parties were also made a part of such a ‘confidentiality club’.

Confidentially clubs or an EEO Club is therefore an important and an efficacious mechanism devised by Courts to balance the requirements of natural justice on one hand and preserving confidential and commercially sensitive information of the parties, on the other. Such a mechanism is also important for shielding innocent parties from mischievous litigants who may file suits for the sole purpose of gaining confidential information of the other party. However, the jurisprudence on this point in India is currently evolving and it will be interesting to see what shape it takes in the years to come.

Authors:
Nandan Pendsey, Partner
Pooja Kshirsagar, Senior Associate

Footnote:
[1] [2018] EWHC 1515 (Ch)
[2] 2017 SCC Online Del 11069
[3] 2016 SCC Online Bom 8599