A case for Confidentiality Clubs in India: Balancing confidentiality with open justice

In litigation, as a regular and common practice, parties serve advance copies of necessary pleadings and documents to all contesting parties in the course of impugned legal proceedings. Many times, these proceedings involve certain documents which are very sensitive and confidential in nature, and in such cases, parties after taking leave of the Court, skip the process of serving the copies to other parties involved and directly file the same in a sealed cover to the Court.

This is usually done because parties do not want that any of their trade secrets or confidential information is leaked to other parties or any other competitors and thus, they avoid their disclosures. There have been various instances of such cases where both, the Supreme Court and the High Courts have allowed filing of documents in sealed covers subject to appropriate safeguards.

The legality and viability of submitting documents in a sealed cover have been time and again questioned on certain grounds.

Moreover, many times in a legal proceeding, especially as a part of proceedings involving trade secrets or IPR, there comes a situation where if confidential information which is relevant to the issues in dispute to the other party are not disclosed to the contested party, there might not be an effective adjudication of the disputes involved failing to meet the needs of justice.

Things get complicated when both the parties have certain confidential information to preserve and both the parties need to have access to them for making out their case and submissions. In such cases, it becomes important to evolve a mechanism to ensure the exchange of confidential information between the parties by balancing the interests of both the parties.

The above scenario, although new, became a common feature in India, primarily in IPR litigation across the country. There wasn’t any framework to regulate such mechanism and courts and parties were finding it hard to implement the same, especially in patent infringement and trade secrets cases. Therefore, in order to solve the issue at hand, courts in India (primarily the Delhi High Court), inspired by the procedure followed in England and USA, evolved the concept of ‘Confidentiality Club’.

As part of this concept, the court could allow the exchange of certain information which was confidential and commercially sensitive to the parties involved in the litigation. As mentioned above, this is a fairly new concept to Indian jurisprudence which has still not fully evolved and courts are still exploring the intricacies involved in setting up of the such clubs. Not many courts have come up with codified rules and procedures for establishing and regulating these clubs.

In fact, till date, only the Delhi High Court has codified the express provision for the constitution of Confidentiality Clubs which finds its genesis in the Delhi High Court (Original Side) Rules, 2018 under Chapter VII Rule 17. It is important to note that even these Rules do not define the clubs as such. Since there are no express statutory rules for the constitution of Confidentiality Clubs, courts have taken contrary views with respect to their implementation, especially when it comes to membership of the clubs.

A Confidentiality Club is nothing but an agreement signed between the parties to the proceedings which helps in restrictive dissemination of confidential information and documents to certain authorised persons. These are created so that certain confidential documents and sensitive information can be used by either of the parties during the recording of evidence. Apart from flowing through the agreement, it can also be created by an order of the Court.

Either way, the documents can be seen by certain authorised people who have been allowed to have access to the documents and information either by the order of the court or through the agreement itself. Since only limited people on both sides of the litigation have access to the said information and documents, any proceedings with respect to the same is conducted in camera, in the limited presence of those members of the Confidentiality Club.

Out of all the features, the most prominent and contested feature is related to the eligibility with respect to membership of the clubs. Parties are per se prohibited to be a member of the club and it is expected that only the lawyers representing the parties along with external expert witnesses should be the members of the club. In England, they are also called ‘external eyes-only clubs.’

In India, a fair number of court orders have allowed setting up of these clubs. Amongst them, the first case in India where a Confidentiality club was set up was in the case of MVF 3 APS and Ors. v. M. Sivasamy and Ors, a case involving trade secrets. The club was comprised of counsel of both parties who were bound by confidentiality and such documents were placed in the safe custody of the court.

Next, in a patent infringement case of Telefonktiebolaget LM Ericsson (publ) v. Lava International Ltd., an application was moved by Ericsson for the creation of a Confidentiality Club, which was allowed for examining the confidential patent license agreements. Three lawyers (except the in-house lawyers of parties) and two external expert witnesses were allowed to be members of the Club who could see the confidential documents.

In the case of Pfizer Inc v. Unimark Remedies Limited, the Bombay High Court, relying on the precedents of MVF 3 APS, allowed the constitution of a Confidentiality Club having lawyers and external experts along with some representatives of the parties as members. It further ordered that the proceedings shall be held in camera.

Things took a different turn in the case of Transformative Learning Solutions Pvt. Ltd. & Ors. v. Pawajot Kaur Baweja & Ors, wherein the Delhi High Court, while constituting the Confidentiality Club, held that there is no bar to a party/litigant being a member of the Confidentiality Club. The Court held that the non-disclosure to the defendant sought by the plaintiffs, deprives the defendant of opportunity of being heard and the right to defend the suit.

In the recent case of Genentech Inc. and Ors. v. Drugs Controller General of India and Ors, a Single Judge Bench of the Delhi High Court allowed the constitution of a Confidentiality Club wherein it allowed a party’s internal expert to inspect the documents placed on record, along with other advocates and external expert. The Court observed that even if inspection is carried out by an external expert, he still has to divulge the information acquired from the documents to enable the plaintiff to carry out the amendments and establish its claim in the suit. Inspection shall lose its relevance, if the outcome of the same is not utilized purposefully by the party that sought the inspection, the Court held.

Conclusion

A careful analysis of the above passed orders reveal that there is no clarity yet with respect to the membership of Confidentiality Clubs. The orders passed in Transformative Learning Solutions and Genentech Inc allowing the presence of parties and internal experts deviates from earlier passed orders wherein only the advocates and external experts were allowed to be members of the clubs. It remains to be seen how these clubs are constituted in future cases by the courts to protect the confidentiality of the documents.

Over the last few years, the law relating to Confidentiality Clubs has been characterized by continuously evolving jurisprudence. Considering the fact that as of now, only the Delhi High Court has laid down certain rules for their constitution, and there is no statutory provision to give recognition to these clubs, it has become more of an evolving judge-made law.

It is likely that in the coming days, the constitution of these clubs shall be possibly extended to litigation in other fields like Arbitration, Competition laws and data protection. In light of the ubiquity of these clubs in legal proceedings, it becomes extremely important to have a structured regulated statutory framework. Since this is one of the exceptions to the principles of open justice, it is imperative that there exists some framework for the same to maintain the balance between protecting confidential information and maintaining access to open justice.