Decisions by the UPC local divisions on the approach to confidentiality clubs

As readers will recall from the post published on 20 March 2024, the Düsseldorf Local Division issued an order in 10x Genomics v Curio (UPC_CFI_463/2023), which departed from the approach taken by The Hague Local Division in Plant-e v Arkyne (UPC_CFI_239/2023) on access to confidential information. The Hague Local Division concluded that access to Plant-e’s confidential information should be limited to only Arkyne’s legal representatives and not include any individuals from the parties involved. In contrast, the Düsseldorf Local Division held in 10x Genomics v Curio that the group of individuals authorised to access confidential information must include at least one natural person from each party and their lawyers or representatives to ensure the parties’ right to a fair trial.

Subsequently, the Düsseldorf Local Division has issued an order in Fujifilm v Kodak which reaffirms its approach in 10x Genomics v Curio. However, the Paris Local Division shed a new light on this issue in its decision in C-Kore v Novawell. It concluded that parties may forego the right to include employees in a confidentiality club by agreement.

Fujifilm v Kodak (UPC_CFI_355/2023) – 27 March 2024, The Düsseldorf Local Division

Kodak submitted an application under r. 262A of the Rules of Procedure (RoP) for the protection of confidential information in its statements of defence. The alleged confidential information related to its business figures and R&D process.

Kodak requested that access to the allegedly confidential information be limited to legal representatives and employees with a legitimate need to access the information and to a maximum of three named employees of Fujifilm not involved in R&D, pricing or other competitive decision making processes. Furthermore, the employees must not be involved in the prosecution of patent applications for a period of 5 years after the end of the present or potential appeal proceedings.

In a preliminary order of 7 February 2024, the Judge-Rapporteur granted access to the information to Fujifilm’s authorised representatives and assistants pending a final decision and invited Fujifilm to make submissions. Fujifilm argued that the restrictions proposed by Kodak in relation to Fujifilm’s employees were unjustifiable and disproportionate as the information mainly related to a “historic” seven year old business practice. Fujifilm also submitted that the Court should dismiss all of Kodak’s requests and made various subsidiary requests which aimed to expand the group of authorised persons, arguing that it was necessary to grant access to more than three employees (including members of its R&D team) to enable Fujifilm to comment adequately on Kodak’s submissions in relation to its prior use defence. Kodak opposed all of Fujifilm’s requests aside from the inclusion of private experts in the confidentiality order.

As in 10x Genomics v Curio, the Court considered the principles set out in Art. 9(1) and (2)(a) of Directive (EU) 2016/943 (Trade Secrets Directive), Article 58 of the UPC Agreement (UPCA) and r. 262A RoP and concluded that R. 262A.6 establishes “as a ground rule of paramount importance that at least one natural person from each party and the respective lawyers or other representatives are to be granted access in order to ensure a fair trial”. The Court noted that the dispute between the parties about whether the information is confidential must be balanced against the right of the parties to a swift procedure.

Although the Court considered that access to the confidential information was important for Fujifilm to prepare its reply to Kodak’s prior use defence, it agreed with Kodak that the information related to internal circumstances that had not been shared with the public or competitors in the industry. The grounds relied on by Kodak were considered to outweigh Fujifilm’s interest in having full and unlimited access to the information. However, the Court concluded that a balance must be stuck between providing an adequate level of protection to Kodak and Fujifilm’s right to sufficient access to the information so that its case may be heard. As the information related to a “historic” practice and a product no longer sold in the market, the Court found it a disproportionate burden on Fujifilm to reduce the number of authorised employees too strictly.

Therefore, the Court ordered that access should be granted to (i) Fujifilm’s authorised representatives and their assistants, (ii) any private experts, (iii) three named employees of Fujifilm with immediate effect, and (iv) six named employees of Fujifilm after the time period for the appeal process has lapsed. No specific restriction was imposed on the commercial activities of the Fujifilm employees beyond the obligation to keep the information confidential and restrict its use to the court proceedings.

C-Kore v Novawell (UPC_CFI_397/2023) – 26 March 2024, The Paris Local Division

On 14 November 2023, a saisie order was issued at C-Kore’s request. Notably, both parties were in agreement that a list of seized documents should be kept confidential. The Court invited the parties to submit a list of proposed members of the confidentiality club and both parties included only their legal representatives. Applying the principles set out in the Trade Secrets Directive, Article 58 UPCA and r. 262A RoP, the Court concluded that, as both parties were in agreement about the composition of the confidentiality club, the proposal was in accordance with the parties’ right to a fair trial. Although r. 262A RoP provides for the inclusion of at least one natural person from each party, the parties may choose to exclude a natural person by mutual agreement.

How could a resolution be achieved?

In Plant-e v Arkyne, The Hague Local Division considered that, under r. 262A RoP, “it is possible for the parties to exclude access by a natural persons by mutual agreement or by the party concerned forfeiting its right to access by a natural person, provided that fair trial is not affected”. The Paris Local Division confirmed this approach in C-Kore vs Novawell, when it issued an order for an “attorneys’ eyes-only confidentiality club” due to mutual agreement by the parties and neither party being at risk of an unfair trial.

However, the Düsseldorf Local Division stands firm in maintaining its position, set out initially in 10x Genomics v Curio and later in Fujifilm v Kodak, that a minimum of one natural person from each party is required to comply with r. 262A RoP and to ensure the right to a fair trial. In Fujifilm v Kodak, the Düsseldorf Local Division considered the ruling by The Hague Local Division in Plant-e v Arkyne and stated expressly that “this procedural law [referring to the Dutch Code of Civil Procedure, which allows for attorneys'-eyes only confidentiality clubs] is inapplicable here and counter to the sources of law to be respected by the UPC as construed by the panel”.

It is clear that the position on the matter remains unsettled in the UPC and the Court of Appeal will likely have to provide guidance on the applicable requirements. Notably, the Düsseldorf Local Division granted Kodak the right to appeal its decision due to the current conflicting approaches within the UPC. It is not yet clear whether Kodak will choose to appeal but it may do so given the significant disagreement between the parties on the number of Fujifilm employees granted access to the information and the level of restriction of the authorised persons’ commercial activities. Therefore, it is hoped that the Court of Appeal will settle these unanswered questions in the near future.