Download TENSIONS AMONG PRIVILEGE, DISCOVERY AND

TENSIONS AMONG PRIVILEGE, DISCOVERY AND FOREIGN ACTIVITIES
Best Practices for Preserving Privilege While Interacting With Foreign Clients
and Counsel in Europe
Dr. Martin Köhler
HOYNG ROKH MONEGIER
Steinstraße 20
40212 Düsseldorf, Germany
[email protected]
I.
Introduction
Despite the large amount of harmonization of material patent law rules, patent
litigation in Europe is still dominated by national procedural rules which may
significantly vary between different European countries. Germany is by far the most
active jurisdiction in Europe when it comes to patent litigation proceedings. The
procedural rules applicable to litigations in German Courts are therefore of particular
relevancy.
The German litigation system is characterized inter alia by the mandatory bifurcation
of infringement and validity proceedings, the focus on written briefs and the relatively
short timelines from filing a complaint to a decision of infringement.
The mandatory bifurcation results in two sets of Courts dealing with different aspects
of the litigation: the Civil Courts (District Court, Appeal Court, Federal Court of
Justice) are in charge of deciding the infringement of a patent whereas the Federal
Patents Court (and on appeal the Federal Court of Justice) is in charge of deciding
on the validity of a patent. The following overview is focusing on the infringement
proceedings conducted in front of the Civil Courts.
One of the main reasons for the relatively short timelines is the lack of US style
discovery or depositions in German proceedings. There are, however, rules that
provide for certain obligations to disclose information and concurrently impose a
certain level of protection for such information (II). Because the German system takes
a very different approach towards disclosure and protection of information disclosed
in the proceedings, compared with the rules applicable in US proceedings, the parties
involved in US proceedings need to take into consideration the different setting early
on if an export of US litigation to Germany is contemplated (III).
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II.
Disclosure and privilege in the German Court system
The German Court system does not provide for disclosure obligations that would
come close to a US type discovery. Consequently, German law does not provide
either for a system of protection of confidential information by rules on privilege
comparable to the US system. Nevertheless, a certain amount of disclosure is
available under the German Court rules, too, and the statute as well as recent case
law protect to certain extent confidential information provided as a consequence of
such disclosure.
Obligations to disclosure and concurrent protection of confidential information result
from general rules applicable to Civil Court litigation as well as from specific rules
developed within the area of intellectual property law and in particular in the area of
patent litigation.
II.1.
General procedural obligations for disclosure and protection of
information
The basic rule in Civil Court litigation is that each party has an obligation to bring the
facts that support the legal arguments made by that party. This applies in the same
way to facts that support the rebuttal of arguments made by the other side.
Consequently, the more detailed the fact pleadings brought forward by one side are,
the more detailed the other side has to reply in order to rebut the arguments. This
basic rule is codified in section 138 Code of Civil Procedure (ZPO):
Section 138 1
Obligation to make declarations as to facts; obligation to tell the
truth
(1) The parties are to make their declarations as to the facts and
circumstances fully and completely and are obligated to tell the truth.
(2) Each party is to react in substance to the facts alleged by the
opponent.
(3) Facts that are not expressly disputed are to be deemed as having
been acknowledged unless the intention to dispute them is evident from
the other declarations made by the party.
(4) A party may declare its lack of knowledge only where this concerns
facts that were neither actions taken by the party itself, nor within its
ken.
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Translation of all cited provisions are provided by the German Minstry of Justice on the website
https://www.gesetze-im-internet.de/Teilliste_translations.html.
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The sanction of insufficient fact pleadings is that the Court will simply dismiss the
argument based on such insufficient pleadings.
For the vast majority of patent litigation cases the basic rule of section 138 Code of
Civil Procedure is sufficient to provide to the Court the facts required to decide the
case. Typically the plaintiff will set out in the complaint conclusive facts supporting
the infringement of each claim feature. In response, the defendant is under an
obligation to bring facts with the same level of detail for each feature where
infringement is contested. Where no such facts are presented by the defendant, the
infringement of the respective feature will be considered uncontested by the Court.
The basic rule of section 138 Code of Civil Procedure and the obligations imposed by
this rules on both parties will usually allow the Court to focus on a limited number of
claim features which are actually in dispute. Only where the realization of a feature is
contested based on sufficiently detailed facts the plaintiff will need to provide
evidence for the facts supporting the infringement argument.
In some case, the plaintiff may not have access to the factual information required as
evidence to support the infringement argument. As an exception to the basic rule,
section 142 and section 144 Code of Civil Procedure therefore allow the Court to
impose further obligations on a party or a third party to provide access to certain
information:
Section 142
Order to produce records or documents
(1) The court may direct one of the parties or a third party to produce
records or documents, as well as any other material, that are in its
possession and to which one of the parties has made reference. The
court may set a deadline in this regard and may direct that the material
so produced remain with the court registry for a period to be determined
by the court.
(2) Third parties shall not be under obligation to produce such material
unless this can be reasonably expected of them, or to the extent they
are entitled to refuse to testify pursuant to sections 383 to 385.
Sections 386 to 390 shall apply mutatis mutandis.
(…)
Section 144
Visual evidence taken on site; experts
(1) The court may direct that visual evidence is to be taken on site, and
may also direct that experts are to prepare a report. For this purpose, it
may direct that a party to the proceedings or a third party produce an
object in its possession, and may set a corresponding deadline therefor.
The court may also direct that a party is to tolerate a measure taken
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under the first sentence hereof, unless this measure concerns a
residence.
(2) Third parties are not under obligation to so produce objects or to
tolerate a measure unless this can be reasonably expected of them, or
to the extent they are entitled to refuse to testify pursuant to
sections 383 to 385. Sections 386 to 390 shall apply mutatis mutandis.
(…)
Further provisions in the Code of Civil Procedure complete these exceptions by
defining the rules on taking evidence in relation to facts requested from a party or a
third party:
Section 421
Production by the opponent; offer to provide evidence
Should the party tendering evidence allege that the record or document
is in the hands of the opponent, evidence shall be offered by filing a
petition that the court direct the opponent to produce said record or
document.
Section 422
Opponent’s obligation under civil law to produce a record or
document
The opponent is under obligation to produce the record or document if,
pursuant to the stipulations of civil law, the party tendering evidence
may demand the surrender or production of the record or document.
Section 423
Opponent’s obligation to produce a record or document in the
event of reference being made to same
The opponent is also under obligation to produce a record or document
to which he has referred in the proceedings by way of tendering
evidence, even where he did so only in a preparatory written pleading.
Section 424
Petition in the event the record or document is to be produced by
the opponent
The petition shall:
1. Designate the record or document;
2. Designate the facts the record or document is intended to prove;
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3. Designate, as completely as possible, the contents of the record or
document;
4. Cite the circumstances based on which it is being alleged that the
opponent has possession of the record or document;
5. Designate the grounds based on which the obligation results to
produce the record or document. These grounds must be demonstrated
to the satisfaction of the court.
Section 427
Consequences of the opponent failing to produce the record or
document
Should the opponent fail to comply with the order to produce the record
or document, or should the court become convinced, in the case
provided for by section 426, that he has not carefully researched the
whereabouts of the record or document, a copy of the record or
document produced by the party tendering evidence may be deemed to
be proper evidence. Where no copy of the record or document has
been produced, the allegations made by the party tendering evidence
regarding the nature and content of the record or document may be
assumed to be proven.
Section 428
Production by third parties; offer to provide evidence
In cases in which, according to the allegations made by the party
tendering evidence, the record or document is in the possession of a
third party, evidence shall be deemed offered where a petition has been
filed with the court that it determine a period for the procurement of the
record or document, or that it deliver an order pursuant to section 142.
Section 429
Obligation of third parties to produce a record or document
For the same reasons as apply to the opponent of the party tendering
evidence, the third party is under obligation to produce the record or
document; the third party can be compelled to produce the record or
document only by bringing an action. Section 142 shall remain
unaffected hereby.
However, the Courts have applied the above exceptions with reticence; the cases in
which a party or a third party has been ordered by a Court to provide certain
information are extremely rare.
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II.2.
Disclosure and protection of information in patent litigation
The German Patent Act (PatG) contains specific rules which allow to access
information required to support claims of infringement. Similar provisions can be
found for other IP rights such as e.g. trademark and copyright.
II.2.1. Pre-trial inspection proceedings
In view of the limits for collecting evidence based on the general rules contained in
the Code of Civil Procedure, the German Courts and in particular the District and
Appeal Courts in Düsseldorf have developed a mechanism to allow a patentee
access to certain facts within pre trial inspection proceedings. Since 2008, this
mechanism has been introduced into the German Patent Act:
Section 140c
(1) Any person who with sufficient likelihood uses a patented invention
contrary to sections 9 to 13 may be sued by the right holder or by
another entitled person for production of a document or inspection of an
item which lies in his control or of a process which is the subject-matter
of the patent if this is necessary for the purpose of establishing the
claims of the right holder or another entitled person. Where there is
sufficient likelihood of a legal infringement being committed on a
commercial scale, the claim shall extend to the production of bank,
financial or commercial documents. If the alleged infringer asserts that
the information concerned is confidential, the court shall take the
measures necessary to ensure the specific protection required in an
individual case.
(2) The claim in accordance with subsection (1) shall be ruled out if
such a claim is disproportionate in an individual case.
(3) The obligation to produce a document or to acquiesce to the
inspection of an item may be imposed by means of an injunction in
accordance with sections 935 to 945 of the Code of Civil Procedure.
The court shall take the measures necessary to ensure the protection of
confidential information. This shall in particular apply to those cases
where the injunction is issued without giving a prior hearing to the
opposing party.
(4) Section 811 of the German Civil Code as well as section 140b (8)
shall apply mutatis mutandis.
(5) If there was no infringement or no risk of infringement, the alleged
infringer may claim compensation for the damage caused to him by the
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production or inspection sought in accordance with subsection (1) from
the person who sought the production or inspection.
Section 140d
(1) In the event of a legal infringement being committed on a
commercial scale in the cases referred to in section 139 (2), the
aggrieved party may also require the infringer to produce bank, financial
or commercial documents or to provide appropriate access to the
relevant documents as are in the infringer’s control and are necessary
for enforcing the claim for compensation if there is doubt as to whether
the claim for compensation will be satisfied in the absence of such
production. Where the infringer asserts that the information is
confidential, the court shall take the measures necessary to ensure the
specific protection required in an individual case.
(2) The claim in accordance with subsection (1) shall be ruled out if
such a claim is disproportionate in an individual case.
(3) The obligation to produce the documents referred to in subsection
(1) may be imposed by means of an injunction in accordance with
sections 935 to 945 of the Code of Civil Procedure in cases where there
evidently is a claim to compensation. The court shall take the measures
necessary to ensure the protection of confidential information. This shall
in particular apply to those cases where the injunction is issued without
giving a prior hearing to the opposing party.
(4) Section 811 of the German Civil Code and section 140b (8) shall
apply mutatis mutandis.
Although inspired by the French saisie contrefacon, the pre-trial inspection is based
on a different legal regime. The inspection is typically ordered by the Court ex parte
and on request of the party that needs access to certain information. The inspection
order will typically allow accessing technical or commercial information available at
the opponent's site, e.g. a manufacturing line. With the inspection order the Court
appoints an expert to execute the inspection. The applicant may be represented
during the inspection by its external legal counsel and patent counsel.
The Court appointed expert will collect the evidence by the means defined in the
inspection order (e.g. photos, copies of documents, tests) and provide a detailed
opinion on the questions contained in the inspection order, typically the question
whether all claim features are infringed or not. This opinion may then be used by the
applicant to support a claim of infringement in subsequent infringement proceedings.
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II.2.2. Rendering of account on patent infringing acts
Beyond the question of infringement, the plaintiff in a patent litigation typically will
need to have access to data that allow a calculation of damages. German patent
infringement proceedings are structured in a two step way as far as damages are
concerned:
-
in a first step, the plaintiff will request the Court to state the defendant's liability
for damages in principle and order defendant to present detailed information
on patent infringing acts;
-
in a second step, based on the information provided by defendant, the plaintiff
will request the Court to decide on a specific amount of damages to be paid by
the defendant (quantum).
The obligation for an infringer to provide detailed information on patent infringing acts
results from section 140b German Patent Act:
Section 140b
(1) Any person who uses a patented invention contrary to sections 9 to
13 may be sued by the aggrieved party for provision of information,
without delay, regarding the origin and the channel of commerce of the
products used.
(2) In cases of an obvious legal infringement or in cases where the
aggrieved party has brought an action against the infringer, the claim
may also be asserted, without prejudice to subsection (1), against a
person who, on a commercial scale,
1. had possession of infringing products,
2. made use of infringing services,
3. provided services used for infringing activities, or
4. according to the information provided by a person referred to in no.
1, 2 or 3, participated in manufacturing, creating or distributing such
products or participated in the provision of such services,
unless that person would be entitled under sections 383 to 385 of the
Code of Civil Procedure to refuse to give testimony in proceedings
against the infringer. In the event of assertion of the claim in judicial
proceedings under the first sentence, the court may, upon motion,
suspend the proceedings pending against the infringer until the
proceedings on the claim concerning the provision of information have
been concluded. The person obliged to provide the information may
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demand from the aggrieved party reimbursement of the expenditure for
the provision of the information.
(3) The person obliged to provide the information shall give particulars
of
1. the names and addresses of the manufacturers, suppliers and other
previous holders of the products or of the users of the services as well
as of the intended wholesalers and retailers, and
2. the quantity of the products manufactured, delivered, received or
ordered, as well as the prices paid for the products or services
concerned.
(4) The claims under subsections (1) and (2) shall be ruled out if such a
claim is disproportionate in an individual case.
(5) If the person obliged to provide the information, while acting
intentionally or grossly negligently, provides false or incomplete
information, he shall be obliged to compensate the aggrieved party for
the damage caused.
(6) Any person who provides true information without having been
obliged to do so in accordance with subsection (1) or subsection (2)
shall be liable to third parties only if he knew that he was not obliged to
provide the information.
(7) In cases of an obvious legal infringement the obligation to provide
the information may be imposed by means of an injunction in
accordance with sections 935 to 945 of the Code of Civil Procedure.
(8) In criminal proceedings or in proceedings under the Act on
Regulatory Offences (Gesetz über Ordnungswidrigkeiten) the findings
may be used against one of the persons obliged on account of an act
committed prior to the provision of the information or against a relative
referred to in section 52 (1) of the Code of Civil Procedure only with the
consent of the person obliged.
(9) Where the information can be provided only by using traffic data
(section
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no.
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of
the
Telecommunications
Act
(Telekommunikationsgesetz)), a court order regarding the admissibility
of the use of the traffic data shall first have to be obtained upon motion
by the aggrieved party. For issuance of this order, that regional court in
whose district the person obliged to provide the information has his
residence, principal place of business or an establishment shall have
exclusive jurisdiction, irrespective of the value in dispute. The civil
division shall decide. The provisions of the Act on Proceedings in
Family Matters and in Matters of Non-Contentious Jurisdiction (Gesetz
über das Verfahren in Familiensachen und in den Angelegenheiten der
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freiwilligen Gerichtsbarkeit) shall apply to the proceedings mutatis
mutandis. The costs of the court order shall be borne by the aggrieved
party. An appeal from the decision of the regional court shall be an
available remedy. The notice of appeal shall be lodged within a time
limit of two weeks. The provisions concerning the protection of personal
data shall otherwise remain unaffected.
(10) The basic right to privacy of telecommunications shall be restricted
(Article 10 of the Basic Law (Grundgesetz)) by subsection (2) in
conjunction with subsection (9).
The list of information defined in section 140b German Patent Act is a standard part
of any decision finding patent infringement. Because of the details the infringer will be
required to provide, the information will typically include data that go to the core of the
defendant's business. Collecting these data and preparing the data in order to be
handed out to the plaintiff often puts a huge burden on the defendant in terms of
dedication of resources.
II.3
Protection of confidential information in Court proceedings
The available rules on protection of confidential information mirror the limited cases in
which a party can be ordered to provide information.
II.3.1. General rules
As a general rule, any facts filed by a party with a Court must be accessible to the
other party and counsel representing the other party. This principle follows from the
constitutional right to be heard in section 103 of the German constitution (GG).
Furthermore, third parties may be granted access to (parts of) the Court files if a
specific legal interest in a file inspection can be established, cf. section 299 Code of
Civil Procedure:
Section 299
Inspection of files; copies
(1) The parties may inspect the court records of the dispute and may
have the court registry issue to them execution copies, excerpts, and
copies.
(2) The president of the court and his deputy may allow third parties to
inspect the files without the consent of the parties if these third parties
have demonstrated their legitimate interest to his satisfaction.
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(3) Should the court records of the dispute be kept as electronic files,
the court registry shall grant inspection of the files by providing a hard
copy of the files, by calling them up on a computer screen, or by
transmitting them as electronic documents. The presiding judge may
decide, at his discretion, to permit attorneys-in-fact who are a member
of a chamber of attorneys to electronically access the content of the
files. In allowing such electronic access to the content of the files, it is to
be ensured that solely the attorney-in-fact will so access the files. In
transmitting the files, the entirety of the documents is to be furnished
with a qualified electronic signature and is to be protected against
becoming known to unauthorized parties.
(4) Drafts of judgments, orders, and rulings; the work supplied in
preparing them; as well as the documents concerning the court’s
coordination with others will not be made available, nor will they be
communicated as copies.
While the access to the Court files in Civil Court proceedings is only granted in
exceptional cases to a third party 2, it is important to keep in mind that anything
contained in a brief or an exhibit filed with the Court will become accessible to the
other side. Conversely, information that is filed "for the Court's eyes only" and not
communicated to the other party will be disregarded by the Court.
As a principle, any hearing in front of the Court acc is publicording to section 169
Courts Constitution Act. However, in order to avoid that confidential information is
communicated to third parties, the Court Constitution Act allows the Court to exclude
the public from the relevant parts of the oral hearing:
Section 172 (Courts Constitution Act, GVG)
The court may exclude the public from a hearing or from a part thereof if
1. endangerment of state security, the public order or public morals is
to be feared,
1a. endangerment of the life, limb or liberty of a witness or another
person is to be feared,
2. an important business, trade, invention or tax secret is mentioned,
the public discussion of which would violate overriding interests meriting
protection,
2
In nullity proceedings (i.e. requests for invalidation of a patent) conducted in front of the Federal Patents
Court, the right for third parties to inspect the Court file is regularly granted. This is a noteworthy difference
from the practice in patent infringement proceedings which are conducted in front of a (specialised) Civil Court.
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3. a private secret is discussed, the unauthorized disclosure of which
by a witness or expert carries a penalty,
4. a person under the age of 18 is examined.
II.3.2. Specific rules in patent infringement proceedings
As far as patent litigation proceedings are concerned, there are, however, some
important exceptions to the general rules as outlined above, increasing the level of
protection for confidential information exchanged within Court proceedings.
On the one hand, the Courts are specifically requested to take appropriate measures
for protecting the confidentiality of information disclosed during pre-trial inspection
proceedings. On the other hand, the parties may be under an obligation to enter into
a confidentiality agreement based on recent case law developed in the field of
FRAND licenses.
Pre-trial inspection orders are typically decided ex parte based on applicant's request
only. At the same time, section 140c (3) explicitly states that the Court shall take
appropriate measures to protect confidential information obtained as a result of the
inspection. Therefore, the inspection order will usually define very strictly the persons
entitled to be present during the inspection. In addition to the Court appointed expert,
the Courts will usually accept on applicant's side the presence of one named external
legal counsel and one named external patent counsel, whereas in-house staff will not
be accepted.
Furthermore, the external counsels representing the applicant in inspection
proceedings are under an obligation of confidentiality towards their client until the
Court has released the information obtained during the inspection. In this way, the
defendant may raise confidentiality concerns in regard to the information obtained
during the inspection. Ultimately, the Court will decide on these concerns and either
release all or part of the information obtained during the inspection or finally decide
that, because of its confidential nature, the information is not released to the
applicant.
A second important exception leading to an increased protection of confidential
information has been recently created by the Appeal Court in Düsseldorf (Appeal
Court Düsseldorf 2 U 31/16, decisions of 14 December 2016 and of 17 January
2017). In the case at hand the defendant had raised the defense that the plaintiff
would have failed to an obligation to license the patent in suit under FRAND (fair
reasonable and non-discriminatory) terms. In order to establish the FRAND character
of license offers made to the defendant, the plaintiff intended to file existing license
agreements, but at the same time requested the Court to keep some of the terms of
these existing license agreements confidential towards the defendant.
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While the Court refused to take into consideration any information that was not
accessible to the defendant, in line with the general rules as outlined above, the
Court ordered that some specifically marked documents would only be accessible to
defendant's external counsel, similar to the protection of confidential information in
inspection proceedings.
Furthermore, the Court set a deadline to the defendant to offer to the plaintiff a
confidentiality agreement suitable to protect the confidential information contained in
the license agreements to be provided by plaintiff (including e.g. a contractual fine for
violations). Failure to provide such an offer for a suitable confidentiality agreement
could lead to a dismissal of the FRAND defense raised by the defendant.
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III.
"Exporting" US proceedings to Germany
The tension between the limited disclosure obligations and concurrent limited
protection of confidential information under German law on the one hand and the
system of discovery/deposition and concurrent protection by privilege under US law
on the other hand becomes apparent when US proceedings are "exported" to
Germany. This may happen if information to be provided within discovery or
deposition is located and has to be collected in Germany. Furthermore, this may
happen if information obtained in US proceedings is used in parallel proceedings in
Germany.
III.1. Executing US discovery and deposition in Germany
Due to the limitations imposed by Art. 23 Hague Convention, the execution of U.S.
Court orders for document discovery is mainly based on an agreement between the
parties of US proceedings. While the parties may agree within the US proceedings to
a specific regime of the discovery, it is advisable to keep in mind already at that stage
the potential practical difficulties that may arise when executing the agreement in
Germany.
Besides the question of resources available in Germany to execute the steps agreed
between the parties in the US, the practical difficulties may result from the fact that
the personnel on the ground in Germany is likely not aware of the implications that
are involved with discovery obligations agreed to in the US proceedings. Therefore,
training of the in-house (and external) staff involved with the execution of US
discovery is crucial.
The execution of electronic document discovery may lead to further challenges, if the
obligations agreed between the parties in the US proceedings are in conflict with
German labor law or data protection law for employees. As a consequence, before
agreeing on specific discovery obligations in US proceedings, parties should make
sure to what extent mandatory German law rules impose limits to these obligations.
Where possible and legally admissible the parties should seek employee's consent to
specific discovery measures early in the discovery process. Another option may be to
include a "subject to national law" exit clause in the agreement concluded in the US.
The same general approach of early awareness of the practical and legal limits
should be applied when shaping the framework for depositions (letter of request
according to Hague Convention) to be conducted in Germany. Depositions under the
rules of the Hague Convention are executed in front of a single judge at a local
German Court, typically with little experience (if any) with US depositions and related
privilege issues. Unless this is specifically indicated in the request letter, there will be
no word by word protocol nor cross examination of a witness. As a general rule, the
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judge will apply German procedural rules to the deposition, which may exclude e.g.
exploratory questions.
As an alternative to the rather burdensome procedure of deposition under the rules of
the Hague Convention the deposition may also be conducted at a US consulate –
provided that the fundamental rights of the witness according to German law are
guaranteed (e.g. right to appear with legal counsel, no obligation for witness to
appear, no obligation to answer, no obligation to sign documents, right to refuse
recording, right to request switching to a formal witness hearing in a German Court).
III.2. Using information from US proceedings in parallel German litigation
In cases involving not only proceedings in the US but also parallel proceeding in
Germany, the parties may envisage using in the German proceedings technical or
commercial information obtained in the course of the US proceedings.
As pointed out above, the rules applicable in Germany on the protection of
confidential information significantly differ from the rules the parties are used to see in
US proceedings. This is particularly relevant for the protection of information filed
within proceedings to a German Court. The German procedural rules allow only in
exceptional cases to apply the "attorneys eyes only" mechanism. While access to the
content of the Court file may be restricted for third parties, the parties in the German
proceedings will normally have access to any information that is contained in the
Court file.
As a consequence, if information is to be used in German proceedings, the limited
protection available under German procedural rules should be kept in mind already
when agreeing on the terms of a protective order in front of a US Court.
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