Confidentiality Clubs in India: Evolving or Being Watered Down ?

Confidentiality Clubs in India: Evolving or Being Watered Down ?

confidentiality clubs

In a recent decision, Genentech Inc. and Ors. v. Drugs Controller General of India and Ors. CS(OS) 3284/2015 pronounced on March 2, 2020, the Single Judge of the Delhi High Court, Hon’ble Justice Mr. Kameshwar Rao allowed Genentech’s (Plaintiff’s) in-house employee, to inspect allegedly commercially sensitive documents of Reliance Life Sciences (Defendant No. 3). The said allegedly confidential documents comprise of details and test data generated by Reliance relating to the main clinical and pre-clinical tests of its biosimilar drug to Trastuzumab – Genentech’s patented drug and subject matter of the instant litigation.  Herein below is our reading of the order and an analysis on whether by not directing appointment of an external/independent expert, the purpose behind formation of Confidentiality Clubs and External Eyes Only (EEO) clubs has been diluted by the said order.

It is regular practice to serve a copy of all documents filed during the suit proceedings upon all contesting parties. In certain cases, however, where documents are sensitive or confidential in nature, the same can be filed in sealed cover upon obtaining leave of the Court, and need not be served upon other litigants. However still, there may be cases where adjudication of the dispute cannot be done without disclosure of information confidential to the litigant and other parties must be given benefit of such information to build their case. In such cases, solution offered by sealed cover filing of documents is not viable, nor is it practical that all parties be served with such sensitive information, allowing the competitors an unfair advantage and the disclosing party being seriously prejudiced. For such matters, like several other jurisdictions, India has created a safe space for the litigants to safeguard the sanctity and confidentiality of their business and commercially sensitive information by establishing a confidentiality club.

Typically, a confidentiality club comprises of an external counsel, identified representatives of the parties and technical experts bound by an undertaking of non-disclosure of information they are exposed to within the said club except for use in course of the said proceedings. In an order passed by the Delhi High on August 31, 2012 in the matter of MVF 3 APS & Ors. vs. M. Sivasamy and Ors CS (OS) No.599/2007, a confidentiality club was set up for the first time in India taking a leaf from the books of the UK Courts.

Further, in view of requests for enhanced safeguards in respect of litigations involving Standard Essential Patents for GSI/4G-/LTE technology, the Delhi High Court in Telefonaktiebolaget LM Ericsson (PUBL) vs Xiomi Technology & Ors CS(COMM) 434/2016 deemed it necessary to limit severely the officers or employees of a litigant, who may have access to the evidence. Accordingly, a reformed and specialized confidentiality club called an EEO club was constituted wherein the members of the club consisted of external lawyers and external experts only and litigants were allowed access to the documents through them alone. This, eventually became the template for formation of confidentiality clubs in case of commercial suits and vide notification dated October 16, 2018, the same was incorporated in the Delhi High Court (Original Side) Rules, 2018 as well, as Chapter VII Rule 17 read with Annexure F.

The facts leading to the Genentech Inc. decision under analysis herein are as follows. An interim application was moved by Reliance (Defendant no. 3), seeking direction from the court that details of an independent expert who shall form a part of the confidentiality club on behalf of Genentech be supplied. This a direction for constitution of confidentiality club had been given vide orders dated April 25, 2016 and February 12, 2020 for inspection of Reliance’s documents by Genentech, represented through “two advocates and an expert”. According to said earlier orders, Genentech elected an expert who is an internal / in-house representative of the plaintiff No.2 Company. Objecting to the said elected expert strongly, the Reliance argued that if said internal expert was allowed, it would defeat the purpose of confidentiality club in the present case.

The Hon’ble Single Judge, dismissed the said interim application by Reliance, thus, raising concerns as regards possible dilution of confidentiality clubs in India. However, on closer reading of the facts, it becomes clear that the said decision is not a deviation from set rules and principles, but an outcome specific the facts at hand, which are as follows:

  • The prior orders directing formation of confidentiality club in the instant case, did not in any way limit that the expert forming part of the club had to be an external expert. If the Court had meant to place such a limitation, it would have categorically stated so.
  • The Court, in other part of the prior order, had granted liberty to Genentech, that after inspection it could amend the pleadings, if so required. This would be possible only if the members of the club divulged the alleged confidential information to the plaintiff. Therefore, a limitation as regards Genentech’s expert being external had not and could not have been logically imposed by the Court.
  • The said prior order on constitution of confidentiality club in the instant case was taken in appeal but not pressed by Reliance and accordingly, said order now has attained finality and accordingly could not be modified by way of a separate application at the option of Reliance.
  • The present suit was not commercial in nomenclature and therefore, the reliance placed on Rule 17 of the Delhi High Court (Original Side) Rules, 2018, for stressing on requirement of an external expert was misplaced, and accordingly rejected.

It was on basis of aforesaid facts and circumstances that an internal expert was allowed to inspect the alleged confidential documents of Reliance and that in our humble opinion this order does not in any way dilute or water down the purpose sought to be achieved by formation of Confidentiality Clubs and EEOs.

NOTE: This article has been contributed by Sneha Sharma, Senior Associate with the Firm assisted in research by interns Niyati Malik and Arjun Parashar.

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