MMI Research Ltd v Cellxion Ltd & Ors

The first point that I have to decide in this afternoon’s hearing is, in substance, whether there has been waiver of privilege in a document which it is said by the Claimant it disclosed accidentally.

This action is a patent application in which the Claimant is making a claim for infringement and the Defendants are counterclaiming, denying infringements and also attacking the patent.

It has a slightly unusual background. The Fifth Defendant in these proceedings is effectively the joint owner of the patent with the Claimant. It is joined as a person entitled with the Claimant to the relief sought by the Claimant. However, about three years ago the Claimant and the Fifth Defendant were themselves litigating over the validity of this patent. The Claimant brought annulment proceedings in Germany against the Fifth Defendant. In those annulment proceedings various claims were raised. The formal claims of invalidity were raised in a German document headed “Klage”, and bearing the date 9^th November 2004. It is, I think, common ground that that is a document which was filed and which contained the grounds on which the Claimant, MMI, attacked the patent. Those proceedings were ultimately settled on terms under which MMI got an exclusive licence for the purposes of the English jurisdiction.

These proceedings were in due course started by the Claimant essentially against the first four Defendants. The disclosure stage was duly reached and on 25^th May 2007 Mr. Stephen Callaghan, who is a director and the chief executive officer of MMI, signed a standard disclosure list. The second item in that list was described as follows:

“2 Klage filed with Bundespatentgalischt with below attachments 9.11.04.”

The first document in the list is titled as follows:

“1 Grounds of nullity pleading filed by MMI Limited, 15/10/04.”

It is in English. Both documents are listed under the heading.

“Bundle 2: Pleadings from the German proceedings before the Bundespatentgelischt, Munich, of MMI Research Limited v. Ruerder Schwartz GmbH & Co KG.”

In due course, those documents having been disclosed in a list, copies were provided to the first four Defendants. I have not seen a proper translation, or indeed any translation, of the German klage document, nor have I read the English document, which I will call the “Action for Nullity” or a “Brief to the German Court”, but I am told that they differ. I can see that they differ in the terms of the annexes which are purportedly annexed to both of them. I am told that the English document makes allegations by MMI against the Fifth Defendant of prior use which match the allegations of prior use which the Defendants now seek to make against MMI. It is obvious from that why it is that the Defendants would wish to have the benefit of that document.

However, it has recently transpired that that English document probably attracts, or once attracted, privilege. On 19^th September 2007 Mr. Patrick Gearon, who is a solicitor with Charles Russell LLP who act for the Claimant, provided a witness statement in which he sought to explain that the English brief was disclosed by mistake. He sets out in that witness statement that he has spoken to Herr Rau of the patent attorneys acting in the former German proceedings, and he gave him certain information. In particular he said that the English document headed “Action for nullity” was never, in fact, filed at the German Federal Patent Court. His information was supplemented by a further conversation between another assistant solicitor at Charles Russell and another lawyer at Herr Rau’s firm, from which it transpired on 19^th September that the English document was never actually filed in the German court. It is described as “no more than an early draft of the pleading”.

On the basis of this material, it is said that the Claimant disclosed the English document by mistake. It was thought by the Claimant to be no more than a translation of the German document headed “Klage”. Now that its true status has been revealed the Claimant seeks orders which procure that no further use be made by the Defendants of this document on the footing that it is a privileged document disclosed by mistake.

In determining this point of whether the Claimant should have its relief, the first matter which has to be dealt with is whether this document is privileged. The evidence as to whether it really is privileged is perhaps not quite as good as one might think it ought to be. It does not necessarily follow that because this document was a document or a draft prepared by lawyers that it is necessarily privileged. It certainly does not follow that because it is a draft prepared by German lawyers it is necessarily privileged. However, Mr. Alastair Wilson QC, who appears for the Defendants, did not really take the point that privilege had not been established. In my view, he was sensible about that. Looking at its genesis, and in the light of Mr. Wilson’s position, I am prepared to treat this document as being privileged. I think if a little more thought had been given to the evidence, reasonable foundations for claiming privilege would have been established. I shall therefore treat this document as being a privileged document.

Second, on the basis of the evidence of Mr. Geary, I find that this was a privileged document disclosed by mistake. The essence of the mistake is that which I have previously described – that is to say it was thought to be more than a translation of the disclosed document. It was not until 19^th September that it was realised by those in this jurisdiction, and that includes, it seems to me, both clients and solicitors, that it was a separate prior document which differed in its content.

That then is the state of affairs on the Claimant’s side of the line. That brings into play the principles under which the court can act to prevent the improper use of privileged material which has been accidentally disclosed. Mr. Lykiardopoulos, who appears for the Claimant showed me Al Fayed v. The Commissioner of Police for the Metropolis [2001] EWCA (Civ) 780, which contains a convenient encapsulation of the principles. They are set out at para.16 of the judgment of Clarke L.J. (as he then was):

“16 In our judgment the following principles can be derived from those cases:

i)

A party giving inspection of documents must decide before doing so what privileged documents he wishes to allow the other party to see and what he does not.

ii)

Although the privilege is that of the client and not the solicitor, a party clothes his solicitor with ostensible authority (if not implied or express authority) to waive privilege in respect of relevant documents.

iii)

A solicitor considering documents made available by the other party to litigation owes no duty of care to that party and is in general entitled to assume that any privilege which might otherwise have been claimed for such documents has been waived.

iv)

In these circumstances, where a party has given inspection of documents, including privileged documents which he has allowed the other party to inspect by mistake, it will in general be too late for him to claim privilege in order to attempt to correct the mistake by obtaining injunctive relief.

v)

However, the court has jurisdiction to intervene to prevent the use of documents made available for inspection by mistake where justice requires, as for example in the case of inspection procured by fraud.

vi)

In the absence of fraud, all will depend upon the circumstances, but the court may grant an injunction if the documents have been made available for inspection as a result of an obvious mistake.

vii)

A mistake is likely to be held to be obvious and an injunction granted where the documents are received by a solicitor and:

a)

the solicitor appreciates that a mistake has been made before making some use of the documents; or

b)

it would be obvious to a reasonable solicitor in his position that a mistake has been made;

and, in either case, there are no other circumstances which would make it unjust or inequitable to grant relief.

viii)

Where a solicitor gives detailed consideration to the question whether the documents have been made available for inspection by mistake and honestly concludes that they have not, that fact will be a relevant (and in many cases an important) pointer to the conclusion that it would not be obvious to the reasonable solicitor that a mistake had been made, but is not conclusive; the decision remains a matter for the court.

ix)

In both the cases identified in vii) a) and b) above there are many circumstances in which it may nevertheless be held to be inequitable or unjust to grant relief, but all will depend upon the particular circumstances.

x)

Since the court is exercising an equitable jurisdiction, there are no rigid rules.”

Mr. Lykiardopoulos put his case on the basis of the matters appearing in (vii). He said that the mistake was obvious in this case and an injunction should be granted because, as he first put it, the solicitors on the other side must have appreciated that a mistake was made; or, if they did not actually appreciate it, it would have been obvious to a reasonable solicitor that a mistake had been made.

There was no formal evidence from Mr. Wilson’s side as to what was thought about this document when it was listed and received by the Defendants’ solicitors. However, rather than have an adjournment while the evidential position was actually resolved, he was able to tell me on instructions what his clients and solicitors’ understanding was in relation to that, and he gave me an undertaking to provide a witness statement confirming what he told me on instructions. His instructions were that when the document was listed and received it was thought that it was a translation of the German document. It was thought that both documents had been filed, not least because the list of documents said they were both filed. It was not understood that there had been a mistake in disclosure. It was not understood that there had been a mistaken disclosure of a privileged document. That is the essence of the understanding on Mr. Wilson’s side.

Assuming a witness statement is provided containing evidence to that effect it seems to me that Mr. Lykiardopoulos cannot come within the first limb of para.16(vii) of Clarke L.J.’s judgment in the Al Fayedcase. It has not been, and cannot be, established that the receiving solicitor realised that a mistake had been made. It is far from obvious to me that the solicitors must have realised that there was a mistake in all the circumstances of this case. In practical terms, therefore, Mr. Lykiardopoulos is thrown back on (vii)(b):

It does not seem to me that it would have been obvious to a reasonable solicitor that a mistake had been made. This is a document emanating from the Claimants’ side. It took the Claimants some significant time to realise that a mistake had been made. The disclosure was made in May. Inspection was, I assume, not very long after that, and it was not until 19^th September that researches were carried out on the telephone, it looks somewhat hastily, as a result of which it was discovered that a mistake had been made. It was apparently not obvious to the Claimants’ solicitors that, looking at the document itself and comparing it with the German, that a mistake had been made and they only realised what the position was when they, themselves, made enquiries of their German counterparts. If it was not obvious to them it seems to me to be very difficult to say that it would have been obvious to a reasonable solicitor acting for the Defendants. I note that the word used by Clarke L.J. is “obvious”: “it would have been obvious to a reasonable solicitor”, etc. The test is not whether, having done a detailed comparison and then agonise and perhaps made some further enquiries, the mistake would have become apparent. The question is whether it is “obvious”. This must flow from the logic of Clarke L.J.’s argument in 16(iii), where he says:

“A solicitor considering documents made available by the other party to litigation … is in general entitled to assume that any privilege which might otherwise have been claimed for such documents has been waived.”

That is the prima facie position. That can only be undermined in circumstances by the obviousness of mistake – absent the obviousness of the mistake, the receiving solicitor is entitled to assume that privilege has been waived. I repeat that it was certainly not obvious to the Claimants’ solicitors who had to make enquiries of Germany. I do not think the material which the Defendants had when they received this document would have made it obvious that there was a mistake.

An eventual comparison of the two documents might have revealed that they were different, but that itself does not mean that it will have become apparent even at that point that there was a mistake. The English document does not describe itself as a draft, or anything like that. It looks like a finalised document. Its front page appears in terms of lay-out to be the same as a translation of the front page of the action for nullity, save that the English version manages to have the attorneys’ identities squashed on to the first page when the German does not. There is a difference in the word processing references in minute footers at the end of the page, but they would not, in my view, have alerted the Defendants’ solicitors to the obviousness of the mistake. If anything, it might have confirmed to them their initial view that it was a translation, because one can see from the very bottom left hand corner of the German version there is a reference which reads “nullity_suit_09_11_04.doc”, and the English version reads “nullity_suit_27_05_04.eng” – in other words, English. That would tend to look, therefore, as though it was an English translation. It would have become obvious when one compared them that it was not necessarily an English translation, but that is not the identity of the relevant mistake in this case. The mistake which has to be obvious for the operation of the principles set out by Clarke L.J. is that disclosure was made by mistake – in other words, that the Claimants cannot have intended to disclose this document.

One can see now why they would wish to say that there was a mistake and they did not intend to disclose it, but it does not seem to me that it would have been by any means obvious to any reasonable solicitor, a fortiori, the solicitors for the Defendants, that a mistake had been made.

In the circumstances I hold that there has been a waiver of privilege of this document, and that there are no grounds for preventing the Defendants from relying upon this document.

In giving this judgment I in no way pre-judge issues which I understand may arise as to how far the waiver goes. I understand there may be arguments as to whether or not the waiver goes to annexes referred to in the English document. I say nothing about that, and nothing in this judgment is intended to bear upon that decision.

The next question I am called on to decide this afternoon is a question of the extent of waiver of privilege. I have already ruled this afternoon that by disclosing a copy of a document which I have called the “English brief” in relation to the German proceedings privilege which would probably otherwise have been attached to that document has been waived. Disclosure was mistaken. The fact that it was mistaken has not been challenged. Despite the fact that it was mistaken I have held that the privilege was waived.

The present point in this application flows from that. That document refers to various annexes. The annexes fall into two categories. In the first category are annexes described as “Annex K9 and K10”. K9 is an illustration of a device demonstrated in Australia said to show the main elements of the system’s sub-structure. That document of itself would, so far as it exists or existed, not be and would not have been a privileged document. The same applies to annex K10, which is described in the English brief as a product specification.

Mr. Wilson seeks specific discovery of those documents. Mr. Lykiardopoulos for the Claimant does not resist the notion that there should be specific disclosure of those documents. He does not claim privilege in those documents. They may or may not still exist and that will obviously have to be investigated by the Claimant, but the claim for disclosure in relation to those documents has elements of the nature of a standard application for specific disclosure. It is right that I should make an order for disclosure of those documents in the sense that they will have to be looked for and their presence revealed in a list or, if they were documents which one existed and no longer exist, that will have to be noted in a list in standard form.

That deals with that half of this application. The other half concerns documents which, if they exist or existed, would have been privileged. The first is annex K11, which is an illustration of a computer screen with a commentary. It is likely that the commentary would have been added for the purposes of the proceedings and being a draft document prepared for the purpose of proceedings will have attracted privilege until it was deployed in the proceedings. It never was deployed in the proceedings in so far as it exists.

The second document of which disclosure is sought in this half of the application is what is described in the English brief as a “Declaration of Mr. Nicholas Simon Stokes”, a representative of the Claimant company in Australia. The brief contains what Mr. Wilson says are virtual quotations, or are likely to be virtual quotations, from that witness statement of its content. Mr. Lykiardopoulos would say probably that they are no more than summaries and certainly not quotations. That dispute is something which need not detain me in these proceedings.

The meat of the application is that Mr. Wilson seeks disclosure and inspection of that document, notwithstanding the fact that it will have been privileged in the hands of the German lawyers, and the basis of his application is that while it will have been privileged, privilege has now been waived by the production of the English brief in respect of which privilege was waived.

The question for me is whether or not waiver of privilege in relation to the English document waives privilege in those two other privileged documents. Guidance as to how far a waiver goes can be obtained from General Accident Fire & Life Assurance Corporation Limited v. Tanta [1984] QB 100, a decision of Hobhouse J., and Regina v. The Secretary of State for Transport (ex parte Factortame) an unreported decision of the Court of Appeal, Auld L.J. and Popplewell J. 7^th May 1997. At this late hour I will not burden this judgment with extensive citations from those cases. I will refer to them briefly where necessary and set out the principles as I see them, as extracted from those cases, and as further deployed in a decision of mine in Fulham Leisure Holdings Limited v. Nicholson Graham & Jones [2006] EWHC 158, where not dissimilar questions arose.

First I bear in mind that this is not the deployment of evidence by the Claimant in order to make a point. This is a revelation of a document in discovery in a disclosure process pursuant to the disclosure obligations. This document is disclosed not because the Claimant seeks to rely on it. As events have shown they would certainly not seek to rely on it. It is a document which they thought they were obliged to disclose without putting direct reliance on it themselves. That seems to me to be material for the purposes of the tests which have to be applied in order to see the extent of a waiver.

Hobhouse J. in his case and Auld L.J. in his case both had to decide the extent of a waiver where a party was likely to be relying on the privileged document disclosed. That the extent of waiver may be different in the case of a disclosure pursuant to a discovery obligation, at least until there is positive reliance by the disclosing party, is apparent from p.115 of Hobhouse J.’s judgment, where he says this at D:

“But it cannot be suggested that any use by an opposite party amounts to a waiver by the original party of anything. Likewise, the mere production of the document on discovery or in some pre-trial procedure cannot in the ordinary course be treated as a waiver of anything beyond the document itself.”

That, in my view, is because the essence of the extent of a waiver is what is fair in the circumstances. A party cannot, by disclosing part of a document or by disclosing one document in a context in which there are others, take the benefit of that document in a manner which would render use of the document without any other material unfair or misleading. That is the basis on which I decided the Fulham Leisure case, and that is why there is a difference between cases in which a party is positively relying on a document put forward and a case where a party has produced a document because they were obliged to do so. In the former case, the scope for misleading is rather greater than in the latter.

In the present case the document was, as I have indicated, produced as part of the fulfilment of the disclosure obligations. It is not, I repeat, a document which, at least at the moment, the Claimant is positively relying on. In the circumstances, it is not easy to see how the production of this document as part of the disclosure process can be treated as being something which is unfair or incomplete in the sense in which those expressions are used in the three authorities to which I have referred.

There would be nothing unfair or misleading about arriving at a trial in which Mr. Wilson is seeking to make such use of the document as he can make and Mr. Lykiardopoulos’s clients are not making any use of it at all. Mr. Wilson can make what he can of the document, but if Mr. Lykiardopoulos is not putting it forward then it is hard to see how the production of the document by itself is going to be unfair or misleading to the court. That is not to say there are no cases in which a disclosure as part of the disclosure obligation could not generate a waiver of privilege going beyond the document itself, but on the facts of this case, bearing in mind, first, the nature of the document, second, the reason for which it was disclosed, and third, and equally importantly, the fact that that disclosure was itself a mistake, it does not seem to me that the production of that document without the disputed annexes is going to be unfair or misleading or an improper incomplete picture for the purposes of the principles in the cases to which I have referred.

In the circumstances, I hold that in accidentally waiving privilege in the English brief the Claimants have not waived privilege in any of the annexes referred to in that document which would otherwise be privileged, and in particular annex K11 and the declaration of Mr. Stokes. If and in so far as the commentary added for the purposes of annex K11 was added for the purposes of the proceedings then it will be privileged and will be within my judgment. If and in so far as it was not added for that purpose it will not be privileged and will be discloseable. It will, as in all cases, be for the privilege claiming party to form a bona fide assessment as to the status of the disputed item and to consider whether privilege can properly be claimed.

The next point is a point which has rather fizzled out as the matter has gone on. Heads 4 to 9 of the draft order seek disclosure of documents which amount to sales documents, marketing related documents and design and manufacture documents phrased in rather general terms. I need not set them out in this judgment. The criticism can certainly be made, of several of the heads, that they are phrased rather too generally. As would appear in relation to one of them, the criticism can certainly be levelled that there is no supporting evidence in support of the application. I shall come to that in a moment.

It transpired during the course of submissions that the real burden of Mr. Wilson’s complaint was that they did not know what search terms had been used in order to carry out certain archive dredging in relation to DVD back-ups. I am told that the Defendants had asked what search terms had been used by the Claimants and had not been told. In a case like this that generated some suspicion. I say nothing as to whether that suspicion is justified or not, but in response to a question from me Mr. Lykiardopoulos accepted that his client would give details of the search terms used by Mr. Callaghan, or whoever was operating the computer at the time he carried out searches for the documents referred in heads 4 to 9 of the schedule to the draft order so that Mr. Wilson’s clients can see whether they consider that those search terms were adequate. No doubt they would wish in those circumstances to consider whether to make a further application for specific discovery.

I would hope that a revelation of the search terms would put the matter to bed, and that it can be seen that there is at that point no reason for challenging the oft-repeated assertion of Mr. Callaghan that, despite the breadth of some of the requests, his company has no relevant documents. That is a statement made in relation to all the categories 4 to 9, except in relation to category 8, and it is one which for present purposes I take at face value, and for limited purposes so does Mr. Wilson. I shall make no order in relation to those categories other than the order that I have indicated, which is to order that the search terms used be revealed to the Defendants.

The remaining category at this point in the argument is category 8. That is as follows:

“All documents relating to the participation in trade fairs and conferences at which the GSMX device/IMSI catcher prior to the priority date.”

That is obviously not quite proper English and Mr. Callaghan in his witness statement in response to this application has sensibly interpreted this to mean “at which the GSMX device was demonstrated prior to the priority date”. Mr. Callaghan points out that that is a very broad description of documents which would include hotel invoices, plane tickets, conference invoices, and so on. I agree that it is broad, and it is unacceptably broad.

There is also another objection to this head of claim, and it actually would apply to others as well, but I think it is only going to be material to this one. It behoves an applicant for specific disclosure to indicate not only what documents they are seeking clearly, but also why they are seeking them. The party needs to demonstrate the issue to which the document goes and some basis for supposing that the party against whom the application is made has some such documents. The evidence in support of this application is singularly lacking in relation to those documents and in relation to this particular category.

For that reason, coupled with the generality of the claim, I shall not make an order for disclosure of these documents. This case needs some focus to be brought to the documents that are being sought, and I think it proper that the focus should be insisted on in an application of this nature. If the application is to be revived in relation to a more limited category of documents, then so be it. I do not encourage it, but on the other hand if there is a reasonable case for making a request for some specific disclosure I hope that the Claimant, which professes a desire to get on with this action and get it ready for trial, will accede to it without any tactical posturing in a further disclosure application. When I say that I do not wish to accuse the Claimant of tactical posturing in this application.

In those circumstances I shall decline the application in relation to para.8.

Mr. Wilson invites me to make an order in the same terms as that made by Warren J. on 20^th August in an application made by the first four Defendants against the Fifth Defendant, the patentee. As a result of that application, Warren J. made a focused disclosure order relating to marketing and promotional materials used at trade fairs. It may or may not be that such an order would be justified in this case, but I am not prepared to make it just because Warren J. made it. If it is to be sought in this application it must be properly applied for.

The next set of categories I am called on to deal with is those at 10, 11 and 12, although I qualify that by saying that Mr. Wilson did not in the circumstances pursue his application under paras.10 and 11 of the draft order. However, he did pursue para.12, which reads as follows:

“All documents relating to the HP8922 device.”

That makes little sense as it stands, and it does not make very much more sense when one looks at the defence pleading in relation to the HP8922.

The HP8922 is referred to in the Defence and Counterclaim of the Fourth Defendants in which it is said that an IMSI catcher used or demonstrated in 1999:

“…had been made by Mr. Timson following meetings with Hewlett-Packard and used that company’s HP8922 test set.”

There is also a reference in relation to obviousness that:

“…the availability of mobile phone test devices such as the HP8922 described above … could be readily adapted to perform the function within at least Claims 1 and 4 of the patent.”

I have already referred in earlier judgments this afternoon to the paucity of supporting evidence in support of various heads of disclosure sought in this case. Those remarks certainly apply in relation to this. There is absolutely nothing in the evidence which would begin to enable anyone to understand why disclosure in relation to the HP8922, which I understand to be a test rig, is going to be relevant at all. Mr. Wilson sought to explain on his feet why disclosure might be relevant. However, that is not the right way of going about a specific disclosure application, as I think I have indicated already this afternoon. An applicant for specific disclosure owes a duty to explain to the other side and to the court, generally in a witness statement, why it is that specific disclosure is being sought, in particular what documents are being sought, that the documents are no wider than are necessary and clearly identifying to what issues in the case those documents go. The application itself is in absolutely general terms, which I would in any event be most unlikely to accede to, but there is no material, despite Mr. Wilson’s best endeavours on his feet, from which I can judge that it is necessary or appropriate to grant this head of disclosure. This head of disclosure, if necessary, if it is to be pursued, must be supported by a proper evidential case setting out the obvious material which is necessary for any application for specific disclosure.

In the complete absence of that material I shall refuse this head of disclosure.

The Applicants this afternoon have been partially successful but very largely not. They have succeeded in being allowed to use a document which the Claimants sought to withhold from them, namely the English brief. That took up a significant part of this afternoon, although it did not take up a significant part of the preparation, as I understand it, because it was an issue which surfaced only relatively recently. Nevertheless, that is a substantial issue on which the First to Fourth Defendants have succeeded. They have succeeded on some other bits and pieces, largely ancillary to that. They have not pursued various other parts of their application, and some of them were manifestly doomed to failure. There were several sub-headings within para.1 which were doomed to failure.

So far as the numerically great items of 4 to 9 are concerned, they have failed on one because the evidence was poor; and on the rest because it became apparent when Mr. Connelly’s witness statement was served that there were no documents. On the other hand, if Mr. Connelly’s witness statement had materialised earlier I suppose there is a chance that the matter would not have been pursued beyond that. One does not know. The fact that Mr. Wilson’s stance right up to the point of time at which he addressed me this afternoon was to seek everything demonstrates that that may well not have been the case.

I bear in mind that the evidence in support of the application, especially the later numerical paragraphs of the application, was not the evidence that is normally required in specific disclosure applications. On one or two heads, had it not been for the effective abandonment of the disclosure application as such because of Mr. Connelly’s assertions, I think the Defendants would in any event have been in difficulties because of the paucity of the evidence overall.

I treat this as an application in which the First to Fourth Defendants have been successful on the major point of being allowed to use the English brief. That may turn out to be a major point in the action. They have been largely unsuccessful in the remainder of the application, notwithstanding the fact that they have managed to extract from the Claimant an obligation to provide details of search terms which the Claimant was otherwise not prepared to give.

In all those circumstances, I have to make a balanced order for costs. Looking at the balance of the matter overall, although the Claimants have lost on a significant matter they have been more successful than not in relation to the rest of the disclosure application. I think the appropriate order for costs is to give the Claimants some of their costs of this afternoon but nothing like all of them. I think the balance of costs is correctly achieved by ordering that the First to Fourth Defendants shall pay 50 per cent of the Claimants’ costs of these applications and today in any event. What I am minded to do, however, even if I assess them now, is to order that they not be paid until the end of day. That would achieve a balance in terms of cash-flow. I will, if the parties wish me to, assess them.