This article was first published by LexisNexis on 22 March 2023: dycip.com/lexisnexis-appeal-confidentialityregime.

As is well-established, SEPs must be licensed on fair reasonable and non-discriminatory (FRAND) terms. In such disputes, once technical trials have established that one or more patents are indeed essential and valid, then a FRAND trial is held to establish the terms of a FRAND licence. As part of that trial, and as established by the Supreme Court in Unwired Planet v Huawei [2020] UKSC 37, other licences already granted by the claimant are reviewed to establish the FRAND terms.

Consequently, SEP infringement disputes before the courts of England and Wales usually involve defendants seeking pre-action disclosure of prior SEP licensing agreements.

However, since the information contained in these agreements is highly confidential, the court commonly establishes a confidentiality regime to govern the disclosure of the information. This regime imposes rules on the receiving parties, restricting the access of the information to certain individuals and preventing unfair use of sensitive information during licensing discussions between the defendants and other parties.

Typically, there are two levels of confidentiality regime established, namely, the external eyes only (EEO) tier and the highly confidential (HCONF) tier. During the first stage of disclosure, sensitive documents such as prior patent licences are disclosed to individuals in the EEO tier, usually consisting of external lawyers, patent attorneys and experts representing the defendant. These external individuals in the EEO tier are responsible for determining whether the documents should be passed on to individuals in the HCONF tier, usually in-house officers or employees of the defendant, in the second stage of disclosure. The HCONF individuals are allowed to access and utilise the documents for litigation purpose, but are bound by an undertaking not to become involved in SEP licensing for two years after accessing the documents.

In this case, SEP licensing agreements were made between Interdigital and other licensees (or counterparts) regarding the disputed SEP. OnePlus requests access to these agreements to gain insights and make informed decisions on the FRAND terms of licensing.

The issues of the dispute revolve around the scope of restrictions imposed on these highly confidential SEP licences, specifically whether it should take a wide form, restricting individuals from participating in any SEP licensing, or a narrow form that only covers SEP licensing with the particular counterparts to the disclosed licensing agreements.

In the recent Mitsubishi v OnePlus (Shenzhen) [2020] EWCA Civ 1562 decision, the court ordered that the licensing prohibition should be based on the narrow form. However, this order was made by consent and the court did not definitively rule on whether the respondents are entitled to insist on the narrow form arrangement.

Therefore, the present decision by the Court of Appeal provides the first set of guidelines for determining the scope of the SEP licensing prohibition in a confidentiality regime.

What was the background?

The claimant, InterDigital, is the proprietor of a portfolio of patents declared essential to different telecommunications standards. The defendants, OnePlus, are involved in the manufacturing and sale of products that comply with these telecommunications standards. In December 2021, InterDigital initiated a legal action against OnePlus, alleging the infringement of certain patents in the SEP portfolio. By March 2022, draft defences and counterclaims had been served by OnePlus. In May 2022, the court issued preliminary directions to schedule two technical trials to deal with the validity, infringement and essentiality of the InterDigital patents. Additionally, a separate trial would be arranged to address the FRAND issues.

In July 2022, Mr Justice Mellor made a case management decision at the CMC for the FRAND trial. In the decision, the judge acknowledged that information from the InterDigital licensing agreements is both highly confidential and commercially valuable. The counterparts to the licences would likely object to the narrow form undertaking. Accordingly, the terms of the confidentiality regime regarding the disclosure to OnePlus was decided to be based on the wide form.

OnePlus subsequently filed an appeal and contended that the narrow form should be adopted. This means that their in-house individuals should only be prohibited from licensing discussions with counterparts in the InterDigital licensing contracts of the disclosed licences. The grounds of appeal mainly rely on the absence of genuine, legitimate and identified concerns to support the wide form. OnePlus asserted that the only material unfairness that could occur is when the in-house individuals use the confidential information to negotiate a licence with a counterparty to the InterDigital Licences. This situation is already covered by the narrow form of the undertaking, according to OnePlus.

What did the court decide?

The court first summarised the authorities outlined in Mitsubishi v OnePlus (Shenzhen) and emphasised the need for a staged approach to address the issues in the case; that it is better to start from a more restrictive state and move to a relaxed state than the other way around. Next, the court examined the nature of the risks of unfairness involved in the wide form. Contrary to OnePlus’s assertion, the court held that the information in a prior licence between InterDigital and a counterparty (A) is also beneficial for licensing negotiations between OnePlus and a different counterparty (B). Accordingly, the risks of similar sort of unfairness exist if the confidential information is used by the OnePlus individual in SEP licensing with B. OnePlus’s contention that there was no material unfairness to justify the wide form was dismissed by the court.

The court went on to consider the particular circumstances of the case. The first factor related to the stage of the proceedings. Following Mitsubishi v OnePlus (Shenzhen), the court found it more reasonable to adopt a wide form of confidentiality regime at the early stages of the FRAND trial and loosen the confidentiality undertaking at a later stage of the proceedings when deemed appropriate. The alternative approach, starting with a narrow form of order and tightening it later, is comparatively more challenging to execute.

The second factor that the court took into account was the available evidence related to the structure and organisation of OnePlus. While InterDigital’s evidence showed that OnePlus is a large organisation, OnePlus had only nominated one individual for the confidentiality regime, and no evidence was provided about the number of lawyers or staffs involved in patent litigation and licensing negotiations. The court reckoned that OnePlus has sufficient resources to establish an information barrier between the litigation and licensing teams, thus the wide form undertaking would not cause any significant inconvenience to OnePlus.

Useful links

• Unwired Planet International Ltd and another (Respondents) v Huawei Technologies (UK) Co Ltd and another (Appellants), [2020] UKSC 37, 26 August 2020: dycip.com/uksupremecourt-2020uksc37
• OnePlus Technology (Shenzen) Co & Ors v Mitsubishi Electric Corporation & Ors, [2020] EWCA Civ 1562, 19 November 2020: dycip.com/oneplus-mitsubishi