Protective Orders

My recent article on the use of protective and confidentiality orders in the Federal Court is available on Slaw. This topic was one of the items discussed last week at the Federal Court town hall and was the subject of an order released last week which stated, “The open court principle is of crucial importance in a democratic society, … Confidentiality orders inherently compromise these fundamental principles and important rights.”

A copy of my article, “Protecting Your Confidential Intellectual Property Information in Court” was published May 11, 2017 in Slaw and is reproduced below. The recent decision referred to above is Teva Canada Limited v. Janssen Inc., 2017 FC 437.

A key feature of litigation is the disclosure of relevant information and documents prior to trial through the process of discovery. For Canadian intellectual property proceedings, most of which take place in the Federal Court, disclosure of confidential materials is the norm, and confidentiality orders are typically obtained to keep sensitive information out of the public record and out of the hands of competitors. A couple of years ago, one judge commented that in intellectual property cases, confidentiality orders are “almost always granted as a matter of course” (see 2015 FC 403).

Confidential information that is often the subject of disclosure in litigation includes trade secrets, valuable know how, contractual relationships with suppliers and distributors, confidential business processes, and on the financial side, profit margins, costs, salary and employee information, revenues, and client lists.

Rules 151 and 152 of the Federal Courts Rules provide the basis for and some default provisions for confidentiality orders. It is typically the case management judge who will balance the confidentiality of the materials with the principles of an open and public court system. This balance was described by the Supreme Court as “[t]he link between openness in judicial proceedings and freedom of expression” (see 2002 SCC 41).

A confidentiality order typically:

  • identifies the nature of the confidential information;
  • limits to access to the information, such as outside counsel, inside counsel, a limit number of individuals at the parties, experts, service providers, etc.;
  • specifically addresses any particularly complicated types of information such as computer source code;
  • specifies how confidential information will be designated on documents, transcripts and other material;
  • describes how confidential information designated in parallel proceedings between the parties may be handled;
  • provides a process for challenging the confidentiality designations made by the other party;
  • provides a process for handling misidentified confidential information that may be inadvertently disclosed; and
  • describes how the designated information will be handled at the conclusion of the matter, including maintenance of electronic backups.

One of the most important aspects of a confidentiality order is delineating what information, and in what manner, may be filed with the court. Except for filing with the court, all other aspects of handling of confidential information may be dealt with by way of agreement between the parties. In some circumstances the term ‘protective order’ refers to agreements on issues as between the parties while ‘confidentiality order’ refer to orders relating to the filing and handling of materials by the court.

To file materials under seal with the court requires the court’s approval and may require that the parties address the balance between the principle of an open courts and the harm from the public disclosure of the confidential information. In some cases, the court may require affidavit evidence explaining the significant of the information sought to be filed and the consequences of its disclosure to the public to the parties. Confidentiality orders covering discovery are usually extended or modified by the trial judge to address confidentiality issues at trial.

A practice that has developed is for the court to permit the filing of discovery motions under seal but require other materials to require the court’s approval on a case-by-case basis, although the trend is towards the court becoming more stringent about the filing of confidential material. Often public/redacted versions of materials are required to be filed along with sealed confidential material.

While confidentiality orders are often prepared and entered on consent of the parties early in a proceeding, careful consideration should be made of the precise terms, because amending an issued order can be very difficult. The test that may be applied to vary a protective order is that the “facts establish some change in circumstances or compelling reason to vary” the order.

In a recent decision (see 2016 FC 1091), a prothonotary denied a request to vary a protective order to allow reports designated as confidential in a Canadian proceeding to be used in a foreign proceeding, stating:

There is a public interest in ensuring that when, as here, parties arrive at an agreement on disclosure to avoid litigation, such that disclosure is volunteered on terms that include a protective order, the terms of the protective order not be modified unless there is a compelling reason to do so. The parties negotiated the terms of this protective order to include appeals from the application and litigation related to it. Extending those exceptions to any litigation between the same or related parties on the same or related facts, merely on the basis that there can be no prejudice to the producing party, would cause parties to lose confidence in their ability to rely on the negotiated terms of protective orders.

An issue that may be considered in a confidentiality order is the interplay between the confidential order, and particularly the handling of designated information, and with the court’s ‘implied undertaking’ rule, particularly with regards to parallel proceedings. The implied undertaking requires that any information gathered on discovery in the Federal Court can only be used for the purposes of the case in which it was disclosed. Similar rules existing in other Canadian courts but very different rules often apply in foreign proceedings.

Preparing the terms of a confidentiality order can in some cases be considered a formality but surprisingly often complex disputes arise as to the implications and consequences of a protective order on substantive discovery issues. Particular consideration should be made of parallel proceedings and future proceedings involving the same parties, and related parties, which are frequent in intellectual property cases.