The UPC’s Hague Local Division issues confidentiality order in Plant-e v Arkyne Technologies - conflict with the Düsseldorf Local Division?

Court of First Instance, Hague Local Division – 4 March 2024, UPC_CFI_239/2023, ACT_549536/2023 and CC_588768/2023

On 4 March 2024, the Hague Local Division of the UPC issued an order relating to Plant-e's application under Rule 262A of the Rules of Procedure (RoP) for a confidentiality order covering financial information provided with their reply to an application by Arkyne Technologies (“Bioo”) under Rule 158 RoP for security for costs in the main proceedings.

In their reply to Bioo’s Rule 158 application, Plant-e had provided redacted and unredacted versions of documents that contained commercial information to support their arguments contradicting Bioo’s contention that Plant-e’s financial position would not allow it to cover Bioo’s legal costs in the event that they were ordered to do so. The Rule 262A application for confidentiality was filed alongside this. 

The redacted information concerned the investments made in Plant-e by investors and the relevant amount of said investments, information on the sales funnel of Plant-e and projected sales in the near future and more information concerning the financial situation of Plant-e than is publicly available.

In their Rule 262A application, Plant-e also requested: 

a) that Bioo be ordered to pay recurring penalty payments for each breach of the confidentiality order;

b) a confidentiality regime in which the redacted information is only to be used by Bioo for the Rule 158 application and no other purposes; and

c) that only one natural person in Bioo may be granted access to the redacted information and that said person may not be involved in sales, procurement of grants and discussions with existing or potential investors, or hold a financial position within Bioo. 

Bioo’s Rule 158 application was rejected prior to this order (without the Court considering the redacted information) and on 26 January 2024, the Judge-Rapporteur issued a Preliminary Order giving the parties the opportunity to provide further comments and giving Plant-e the opportunity to withdraw its Rule 262A application.

Plant-e maintained its Rule 262A application, stating that the redacted information had already been submitted and shared with Bioo’s representatives and might become relevant if an appeal was filed against the rejection of the Rule 158 application. Bioo maintained the primary position that the Rule 262A application should be dismissed. 

In relation to requests a) and c) above, the parties agreed that if the Rule 262A application is granted no penalty for breach should be imposed, and to establish an “attorneys’ eyes only’’ confidentiality club such that only Bioo’s legal representatives would be allowed access to the redacted information. Plant-e amended its Rule 262A application accordingly. 

The parties did not agree on b), the use of the redacted information. Plant-e argued that the use of the redacted information should be limited to the context of the Rule 158 application only. Bioo argued that the use of the redacted information should be permitted for the entirety of the proceedings pending between the parties, including both the main proceedings and the counterclaim.

Legal framework 

In the UPC, the protection of trade secrets, personal data or other confidential information is governed by Article 58 of the UPC Agreement (UPCA) which has been implemented in Rule 262A RoP. These state the following (with emphasis added). 

Article 58 UPCA: 

“Protection of confidential information

To protect the trade secrets, personal data or other confidential information of a party to the proceedings or of a third party, or to prevent an abuse of evidence, the Court may order that the collection and use of evidence in proceedings before it be restricted or prohibited or that access to such evidence be restricted to specific persons.”

Rule 262A RoP:

“1. Without prejudice to Article 60(1) of the Agreement and Rules 190.1, 194.5, 196.1, 197.4, 199.1, 207.7, 209.4, 315.2 and 365.2 a party may make an Application to the Court for an order that certain information contained in its pleadings or the collection and use of evidence in proceedings may be restricted or prohibited or that access to such information or evidence be restricted to specific persons.

[...]

6. The number of persons referred to in paragraph 1 shall be no greater than necessary in order to ensure compliance with the right of the parties to the legal proceedings to an effective remedy and to a fair trial, and shall include, at least, one natural person from each party and the respective lawyers or other representatives of those parties to the legal proceedings.”

Decision

The Court considered that the redacted information, being financial information that is not in the public domain, qualified as “confidential information” according to Article 58 UPCA and Rule 262A RoP and Bioo’s response failed to provide convincing arguments to counter this assertion. 

The Court considered that unprotected disclosure of this information to employees of Bioo would likely have a negative impact on Plant-e, as the proceedings involved competing small companies with limited staff. Taking into account the interests of both parties, The Court found that giving a natural person of Bioo access to the redacted information would be likely to distort competition, which should be prevented under Article 42.2 UPCA. Withholding the redacted information from a natural person of Bioo would not affect Bioo’s position in the main proceedings (as it was not relevant) or in the Rule 158 application, as sufficient information was available for the Court to take a decision on this without considering the redacted information.

The Court noted that it is not entirely clear whether denying access to at least one natural person of Bioo is in line with the legal framework of the UPC outlined above. The wording of Rule 262A.6 is identical to the wording used in Article 9(3) of Directive (EU) 2016/943, which has been implemented in different ways in member states. 

For example, in Germany and Belgium, the provisions of the Directive have been extended to apply to all types of cases in which confidential information is concerned (even as just a side issue), including a strict rule that at least one natural person from each party should be granted access to the confidential information. However, in the Netherlands, the application of the Directive is limited to proceedings concerning the enforcement of trade secrets, and a different regime applies where confidential information is at issue in other proceedings (such as in patent cases), where access to such information can be limited to attorneys only where it is considered to be appropriate and in line with a fair trial. 

The Court considered that the differing approaches of contracting member states gave room for flexibility to base access to confidential information in the UPC on both the circumstances of the case and type of confidential information concerned. They found justification for this approach in “the logic that the principle of fair trial is more likely to be impaired when the essence of the case is the trade secret and no natural person of a party would get access to the confidential information, as compared to a case wherein this information is a side issue (like in the case at hand)”. 

In interpreting the legal framework of the UPC outlined above, the Court found that the wording of Rule 262A.1 and Article 58 UPCA allowed for a reading that, in addition to limiting access to specific persons, it is also possible in proceedings before the UPC to rule that access to confidential information be prohibited completely, as an alternative. This was specifically due to the use of the wording “restricted or prohibited or (…) restricted to specific persons” (emphasis added).  

The Court also went further, and stated that even if a strict rule that at least one natural person from each party must be granted access to the confidential information was read to apply in the situation of this case (following a different interpretation of R.262A.6) it would still be possible for the parties to exclude access by natural persons through mutual agreement, or by the party concerned forfeiting its right to access by a natural person, provided that this does not impact the prospect of a fair trial. 

The Court therefore ordered that only Bioo’s legal representatives shall have access to the redacted information and that the redacted information may be used by Bioo for the Rule 158 application and no other purposes.

Commentary and possibility of appeal

This order broadly follows the Dutch implementation of Article 9(3) of Directive (EU) 2016/943, according to which the regime for confidential information in patent cases can be limited to external attorneys where it is considered to be appropriate and in line with a fair trial. It is perhaps unsurprising that the Hague Local Division has taken a Dutch-style approach to the interpretation of Article 58 UPCA and Rule 262A RoP. 

We are not aware of an appeal being filed against this order, and this may be unlikely given the parties agreed on most issues (including the establishing of an “attorneys’ eyes only’’ confidentiality club). However, we have already seen what appears to be a conflicting interpretation of Rule 262A RoP from the Düsseldorf Local Division in a preliminary order for protection of confidential information dated February 23 2024 (10x Genomics v Curio Bioscience Inc., UPC_CFI_463/2023). In this, the Court found that it was appropriate and necessary to limit the number of employees authorized to access the material to the minimum number provided for in both Directive (EU) 2016/943 and Rule 262A.6 RoP until a final decision on the request for confidentiality protection. The Düsseldorf Local Division considered the minimum number of employees to be one. This appears to be in line with the German implementation of Article 9(3) of Directive (EU) 2016/943.

On this basis it seems likely that the Court of Appeal will have to resolve these conflicting approaches sooner rather than later, and we will look out for further developments on this issue.