Fight club

The first rule of fight club is you do not talk about fight club. In legalese, I guess you could call that a confidentiality clause. Among other clubs which have been relatively confidential, there is also, well… confidentiality clubs precisely.

A confidentiality club is an agreement between litigants, per which only specified persons (such as specified outside or in-house attorneys) are granted access to some documents. This can be a useful tool for protecting confidential information from being fully released to the other party, while at the same time making sure that the relevant evidence can be debated.

Although I understand that confidentiality clubs are common at least in the UK, the same cannot be said of France.

Courtesy of Denis Monégier du Sorbier, here is an interesting decision issued almost two years ago, which opens the door to such clubs in this country.

In this case, the Dutch company DSM IP Assets BV obtained ex parte orders for carrying out infringement seizures against three defendants (Univar, Novozymes Biologicals France and Novozymes France), in order to demonstrate infringement of one of their European patents. After the seizures were performed, the seized parties filed a motion in court in which they requested that the seized documents should be placed under seal, and that the orders authorizing the infringement seizures be modified.

Such a motion is handled in urgency proceedings by a single judge from the Paris Tribunal de grande instance (TGI), and it results in an order being issued.

It is well established that seized documents which are confidential in particular as they relate to technological or business secrets, and which are not relevant for the demonstration of infringement, should not be transmitted to the claimant. On the other hand, documents which are relevant for the demonstration of infringement are usually to be released to the claimant, even if they relate to technological or business secrets.

After a seizure, it is a common reaction by defendants to request that all documents be placed under seal. It is then usual for an expert to be appointed by the court to sort out the documents and issue an official recommendation as to which ones may be given to the claimant and may thus be part of the ensuing litigation.

This can be a long and cumbersome process, especially if the amount of documents to be handled is large (which can be the case if documents were seized in a digital form); and especially if the parties fight hard on every piece of information in front of the expert, or in front of the case management judge (whenever they claim that there are issues in the way the expertise is handled).

In the DSM v. Univar case, the judge started by rejecting Univar’s and Novozymes’ request to place all seized documents under seal. He noted the following:

[…] As rightly stated by DSM, it is clear that Univar simply made a list of seized documents and stated that they are all confidential, without explaining, document by document, what the nature or the reason of such confidentiality is. 

Besides, it can be seen on the seizure report written in Fontenay Sous Bois that Ms. Theron, CEO, stepped in so as to redact mentions relating to the enzymes on the list of ingredients / food additives, to the amounts on the sales log and the purchases log, to the names of customers and to the turnover on the statement of sales per client, as well as invoices and delivery slips. 

Similarly, it can be seen on the seizure report written in the secondary office in Lieusaint that Mr. Corby, head of the warehouse, stepped in so as to redact […] the names and addresses of recipients on delivery slips, and the products other than Lactozym Pure cited on the reception orders. 

Thus, it should be emphasized that important information such as customers’ names, amounts of sales and products at stake is actually not accessible. If Univar’s representatives relied on confidentiality so as to redact some information, it can be assumed that the information that they allowed to be seized is not of a confidential nature preventing any disclosure. 

Besides, a number of seized documents are public, as either they can be found on the internet, or they are enclosed with the marketed product, and nothing suggests that they may contain any secret information. 

In summary, it is not sufficient for the defendants to simply ask for a blanket seal on everything, without specifying exactly which information is confidential and why – which makes a lot of sense.

There may be another lesson here for seized parties. Sometimes, some sorting out of confidential information and some redacting already takes place during the seizure itself. On the one hand, this may be the best way to prevent really sensitive information from leaking to the plaintiff. But on the other hand, this needs to be carefully done, as it may then be slightly more difficult to prove that non-redacted information should later be redacted as well.

Then comes the second and most interesting part of the decision, dealing with the defendants’ request for a modification of the seizure orders.

Among the various actions and measures authorized by the orders, one paragraph was about setting up a confidentiality club to handle evidence post-seizure. This is the paragraph that Univar et al. wanted to remove from the orders.

 

Two lawyers actuated by the hands of their respective clients

The judge held as follows:

[The defendants] claim that DSM, by inserting this mention “in the middle of the other requests in a unilateral and totally incongruous manner”, attempted to order a club which has no legal existence and no legal basis, and to which they firmly object. 

They add that the notion of confidentiality club is unknown in our procedure, wherein an expert is appointed to select which documents should remain secret, that the practical terms of how it operates are inconsistent, and that such a club was recently refused in another similar case. 

However, they underestimate the judge’s vigilance by thinking that an entire paragraph could elude his wisdom […]. Actually, if setting up such a club is indeed not provided in the statute, on the other hand it does not contravene the basic principles of our law, since it makes it possible for both parties, in an adversarial manner, to agree on the evidence which can be used in the litigation. 

Moreover, it is of course not mandatory. It is clear that if the parties […] do not agree on setting up such a club, to which no attorney at law or patent attorney could possibly be forced, one of them can file a motion in front of the case management judge to request that an expert be appointed to sort out the exhibits and select those which should remain secret, and this is a solution which would then put the parties back on the usual track. 

So, confidentiality clubs are possible in French patent litigation – although mention is made of another decision in which this option may have been rejected.

This is good news as it is an opportunity for parties to cooperate to a limited extent in order to streamline the proceedings and eliminate the additional cost and pains of formal discussions in front of an expert.

On the other hand, according to the order it is always possible for an uncooperative party to balk at joining the club and to have its case heard in front of an expert and/or of the judge at every step of the way.

Case management may be one of the weak points of patent litigation in France. It works well when the parties do cooperate. But it can be relatively easy for a party wanting to delay the lawsuit (often the defendant, but sometimes also the plaintiff) to disrupt the schedule by filing a number of motions, not complying with the deadlines set by the judge, etc. Such a rogue strategy may work to some extent as (i) the right to be heard is regarded by judges as a paramount principle and (ii) the court’s docket is usually more than full anyway, so that there is little incentive for them to force the parties to move on quickly.

Hopefully, confidentiality clubs may contribute to an overall increase in the efficiency of the system, by arousing a form of cooperation on side issues so as to focus on the real disagreement between the parties.

The real question though is whether they will catch on. Eric Halphen, the judge who issued the order in the case at hand, has left the IP chamber of the Paris TGI since then. We are thus looking forward to his colleagues’ position on such clubs for a streamlined fight.


CASE REFERENCE: TGI Paris, 3ème chambre 2ème section, ordonnance de référé, February 13, 2015, Univar et al. v. DSM IP Assets BV, RG No. 15/00822.

Wizard’s chess

Sometimes litigation can get as complex as a game of chess. Each move by one party triggers a responsive move by the other party. France offers a large number of pieces to chess players, with different possible judges and various procedural rules depending on the nature of the claim filed at each move. And since legal actions sometimes seem to get a life of their own independently of the parties who start them, wizard’s chess would in fact be a more accurate depiction: this is the Harry Potter version of the game where animated pieces fight for real on the chessboard.

Today’s decision is but one move in a wizard’s chess game. The ruling itself is relatively short although it tackles a couple of interesting points on the saisie-contrefaçon procedure. However, the overall context is quite complicated and by itself deserves a post to describe it.

In this game, the white team is SPX Flow Technology SAS (SPX) and the black one is Pierre Fabre Dermo Cosmétique (Pierre Fabre) – that’s because the whites are those which move first.

In 2009, Pierre Fabre hired SPX for developing a sterilization process for cosmetic products. This led to the sale of two sterilization installations by SPX to Pierre Fabre in 2011. The same year, Pierre Fabre filed a French patent application related to this sterilization technology. The patent was granted in 2013.

SPX was not too happy-happy about the patent and therefore filed a declaratory action for non-infringement on October 27, 2014 in front of the Paris Tribunal de grande instance (TGI), in order to be able to continue exploiting the sterilization technology and to sell sterilization equipment to other clients. Two months later, on December 23, 2014, they celebrated Christmas by filing an additional claim against Pierre Fabre for ownership of the patent.

The case management judge decided that the ownership claim should be decided on first, since depending on the outcome it might be useless to look at the non-infringement claim. After an oral hearing which took place on September 22, 2015, a first judgment was handed down on November 5, 2015, in which SPX’ claim for ownership was rejected. An appeal is apparently pending.

Meanwhile, on July 17, 2015, Pierre Fabre sent a cease and desist letter to Cosmetolab, one of SPX’s clients, which had bought a sterilization installation from them. It seems that Pierre Fabre had learned about SPX’ dealings with Cosmetolab in the course of the TGI lawsuit.

SPX immediately reacted to this letter by filing a disparagement claim in front of the Tribunal de commerce in Evreux (hometown to both SPX and Cosmetolab) on August 6, 2015, in urgency proceedings. Readers may want to refer to an earlier post in which I have presented some of the specifics of the French Tribunal de commerce and of its urgency proceedings – as opposed to the TGI to which we are more accustomed in patent matters. The judge in charge of urgency proceedings rejected SPX’ complaint. No appeal was filed.

The cease and desist letter was obviously only an initial skirmish in the next battle, since Pierre Fabre then filed a petition for three seizure (saisie-contrefaçon) orders on September 1, 2015. This is an ex parte motion filed in front of one of the judges on duty in the Paris TGI. The orders were granted – as is normally the case, and Pierre Fabre accordingly proceeded with seizures on September 9 and 10, 2015, not only at SPX’ but also at Cosmetolab’s as well as Agro Hall’s, the research center hosting Cosmetolab on a campus in Evreux.

In French patent law, a saisie-contrefaçon is a very usual mise en bouche – an appetizer before the meal consisting of the infringement lawsuit. In this case, since a declaratory action was already pending before the Paris TGI, the meal took the form of a counterclaim for infringement on October 7, 2015.

In the meantime, further urgency proceedings were started by SPX against Pierre Fabre so as to protect some confidential documents seized at Agro Hall’s. However, the parties found a procedural agreement to move this part of the dispute to the main non-infringement case.

Finally (for now!), SPX filed a motion for cancellation of the three seizure orders on October 22, 2015. Cosmetolab and Agro Hall intervened. And this gave rise to the decision that I wanted to talk about today – which obviously plays a relatively minor part in the overall game: namely the order by a (single) judge from the Paris TGI ruling on the motion for cancellation.

Don't be mistaken, wizard's chess is in fact no child's play.
Don’t be mistaken, wizard’s chess is in fact no child’s play.

The argumentation by SPX et al. for canceling the orders was twofold: Pierre Fabre was not entitled to file a petition for these orders, and they had acted in bad faith.

The judge nicely summarized the legal criteria to be applied:

The purpose of the motion for cancellation is to reintroduce the adversarial principle into ex parte proceedings […]; if the petition [for seizure] was granted, those concerned may refer to the judge who issued the order. 

On this occasion, the judge who authorized the seizure hears observations from the seized party or other concerned third party if the seizure did not take place in the premises of the alleged infringers, and he/she examines whether, on the day the seizure was authorized and in view of the explanations and evidence provided by those who request the cancellation, he/she would have issued the same decision, would have limited it or would not have issued it at all. 

The first argument in support of the cancellation claim is probably the most interesting one. Any patent proprietor is entitled to file a petition for a seizure based on its patent. But in this case, a claim for ownership of the patent was pending on the day the petition for seizure was filed. Did this make Pierre Fabre’s petition illegal, as there was a doubt or at least a challenge as to whether Pierre Fabre was the rightful patent proprietor? No said the judge, because Pierre Fabre was the actual owner of the IP at the time the petition was filed, and this is all that matters:

They who petition for a saisie-contrefaçon, in order to demonstrate that their petition is admissible, must file: 

– a copy of the patent at stake,

– a copy of the status of the renewal fees, 

– an extract from the national patent register showing that the petitioner is the patent proprietor as registered. 

In the present case, it is not challenged that [Pierre Fabre] filed such evidence with the judge who authorized the three seizures. 

Although the ownership of the rights was challenged in front of the court in the context of the ownership claim filed by [SPX], on the day the petition was filed [Pierre Fabre] was the owner of the [patent] and was entitled to file such a petition. 

The above quote confirms that it is pretty easy indeed to get a saisie-contrefaçon in France -this is clearly one of the strongest advantages of local practice for patentees.

The second point in SPX and its partners’ argumentation focused on Pierre Fabre’s alleged bad faith. The point was developed in two parts: Pierre Fabre was disloyal because they hid information from the judge in charge of granting the seizure orders; and they distorted the seizure procedure as they were actually looking for other evidence than that needed to prove their infringement case.

There has been a trend in recent case law to cancel orders for seizures when judges felt they had been fooled by bad faith litigants. SPX et al. attempted to follow the trend – but this time to no avail.

The timing of the petition filed by Pierre Fabre was admittedly rather remarkable: the eve of the pleadings of the ownership part of the case. SPX said the petition did not mention that this oral hearing was about to take place. The judge replied that this was not an issue, as the various pending legal proceedings were mentioned in the petition, and practically speaking the judge who issued the orders for seizure was also the chair of the court dealing with the ownership and infringement case, so that she was well aware of the timing.

Regarding the alleged distortion of the seizure procedure, SPX et al. argued that Pierre Fabre’s true agenda was not to find evidence of patent infringement but rather to intimidate Agro Hall so as to stop the business deal with SPX, and also to interfere with the then pending disparagement lawsuit in Evreux.

Well, let’s face it, although the official purpose of a saisie-contrefaçon is to find and preserve evidence of infringement of an IP right, intimidation is often part of the reasons why a saisie is performed. But this is also true of legal actions in general. In this case, the judge was not convinced that intimidation or interference with other legal proceedings were Pierre Fabre’s actual motives:

[…] [Pierre Fabre] filed […] an infringement counterclaim within the statutory time limit against [SPX], Cosmetolab and Agro Hall, which shows that their intention was really to sue the plaintiffs of the declaratory action. 

No disloyalty has been demonstrated, for the letter of July 17, 2015 is mentioned in the petition as a cease and desist letter to Cosmetolab, and a seizure was subsequently requested against this company. 

Finally and above all, the president of the Evreux Tribunal de Commerce has [already] issued the judgment against which no appeal was filed, so that the evidence collected during the seizures was not used in those proceedings. 

The orders for seizures were therefore not cancelled, and we can thus wait for the next move from one side or the other.

My guess is that the rest of the case will drag on for a very long time. The situation is quite interesting because:

  • On the one hand, the French patent has an equivalent pending at the EPO (with two divisional applications already filed). Now, in such a case, the court must stay the infringement proceedings (article L. 614-15 Code de la propriété intellectuelle) until the European patent is granted and substitutes for the French patent, or until the European application is refused, withdrawn or deemed withdrawn, or until the European patent is revoked. So this can take forever (especially if the divisional applications also need to be taken into account, which is an interesting legal question).
  • But on the other hand, examination proceedings at the EPO were suspended as from January 29, 2015 due to the pending ownership lawsuit.

At the present time, and pending resumption of the examination proceedings at the EPO, this looks like stalemate!


CASE REFERENCE: Tribunal de grande instance de Paris, ordonnance de référé-rétractation, 3ème chambre 1ère section, February 11, 2016, SPX Flow Technology et al. v. Pierre Fabre Dermo Cosmétique, RG No. 15/15073.