Smith & Nephew Plc v Convatec Technologies Inc & Anor

This is a patent action about silverised wound dressings. The trial took place in November 2013 and on 12^th December 2013 judgment was handed down. The hearing to decide questions of relief and costs was on 17^th January 2014.

The action was about whether a process used by Smith & Nephew to make their Durafiber Ag product infringed Convatec’s patent EP (UK) No. 1,343,510. In the course of the proceedings Smith & Nephew gave disclosure relating to their Durafiber Ag project. This disclosure included numerous documents and summary documents which set out full details of Smith & Nephew’s manufacturing processes.

Unquestionably that information can properly be characterised as a trade secret of Smith & Nephew. It is highly confidential, technical information which would be of enormous value to a competitor. Its public disclosure would be very damaging to Smith & Nephew. Ordinarily no rational commercial organisation would voluntarily do anything which put this information in the public domain. However the technical information is at the heart of the issues in the case. It would have been quite impossible to decide this case fairly without that disclosure and the evidence relating to it. In order to decide the question of patent infringement in this case it was necessary to analyse and consider detailed technical evidence which was based on that disclosure.

The difficulty in dealing with disclosure of technical secrets is a problem which has been recognised in patent cases for many years. At the stage of disclosure it is well established that in a proper case a confidentiality scheme or “club” can be set up. See three Court of Appeal authorities Warner Lambert v Glaxo [1975] RPC 354, Roussel Uclaf v ICI [1990] RPC 45 and Lilly ICOS (No 2) [2002] EWCA Civ 2. The scheme may be arranged by order of the court but is often arranged by an agreement between the parties, albeit always subject to the Court’s jurisdiction. The scheme provides that documents in disclosure which are identified as confidential are identified as being part of the scheme. For the documents in the scheme, access to them and their use by the receiving party and its legal team will be expressly restricted. Commonly the documents will be accessible to the solicitors and counsel and relevant independent experts who are to give evidence in the case. Commonly also the documents will be accessible only to named individuals at the receiving party. The system is flexible and there are many variations. In some cases signed undertakings are required from some or all of the persons to whom the documents are to be disclosed. In some rare cases it is fair to restrict access to the documents even further.

As the case progresses evidence can be prepared which deals with the confidential information covered by the scheme. There may be parts of the witness statements and experts’ reports which are kept confidential under the scheme as well.

The system can give rise to disputes which have to be resolved in court but by and large it can be said to be system which works well. Justice is done because the patentee is able to have sufficient access to the relevant documents to have the issue decided fairly and conversely the trade secrets of the alleged infringer are preserved. Such a scheme may also apply to documents disclosed by the patentee and to documents from third parties.

When the matter comes to trial the confidentiality of documents in the scheme is maintained in three ways, by an interim order under CPR r31.22(2), by not stating the confidential information out loud in public and by sometimes sitting in private for part of the case.

The interim r31.22(2) order is made at the start of the hearing until judgment or further order. It applies to any documents within the scheme which are read by or referred to in court. The effect of the order is that until judgment CPR 31.22(1) does not apply to such a document. Without such an order, the effect of r31.22(1) would have been that if the document was read or referred to by the court, the restriction prohibiting the receiving party from using it only for the purposes of the proceedings would not apply. Although the confidentiality scheme is distinct from r31.22, the agreement setting up the scheme will contain a corresponding provision (c.f. Lilly ICOS No 2 paragraph 10).

Making an order under r31.22(2) allows for confidential documents to be referred to in public (albeit not read out) without prejudicing their confidentiality. That way the trial can be conducted in public, the confidentiality of the relevant information is maintained for the time being and the trial process is not delayed by arguments over confidentiality. Once the trial is over, as part of the hearing to deal with remedies and costs, the court will be asked deal with r31.22. If appropriate a permanent order under r31.22(2) will be made for some or all of the documents. For any document covered by the interim order, if no permanent order is made at that stage the interim order expires.

However it is often the case that it is impractical to deal with some confidential information this way. Being unable to have an unfettered discussion about it may be impractical and it may be unfair to a witness to cross-examine them on this basis. When this happens and assuming it is appropriate to do so, the Patents Court will sit in private for part of the case.

It is well understood that it is highly desirable to avoid trials in private or partially in private (see CPR r39.2 and Lilly ICOS No. 2 para 25(v)). This well known principle was reiterated in the Supreme Court by Lord Neuberger in Bank Mellat v H.M. Treasury [2013] UKSC 38 at paragraph 2. There he said that the idea of a court hearing evidence or argument in private is contrary to the principle of open justice, which is fundamental to the dispensation of justice in a modern, democratic society but went on to recognise that in rare cases the court has power to have a private hearing if it is strictly necessary to have such a hearing to achieve justice between the parties and if the degree of privacy is kept to a minimum. Lord Neuberger referred to cases in which “commercially valuable secret information is in issue” as an example.

Lord Neuberger did not need to consider in any more detail what the boundary is between commercially valuable secret information which would justify excluding the public and what would not. It is easy to see why technical trade secrets should be treated this way but I note that Lord Neuberger did not confine himself to information of a technical nature and I note also, as Mr Mellor submitted, that in Lilly ICOS No 2 the Court of Appeal held that a document containing advertising figures should be made the subject of a r31.22(2) order. Clearly therefore commercially valuable secret informationwhich would justify excluding the public or depriving the public from access to a document used at trial, is not limited to technical trade secrets. It includes other information as well. The nature of the information and the commercial value and secrecy of it must be sufficient, bearing in mind its role in the proceedings, to justify an order excluding the public or depriving the public of access to the document. Given the importance of open justice, it seems to me that the test must be that material used at trial should only be kept confidential if justice would not be done otherwise.

The rarity of sitting in private referred to by Lord Neuberger was referring to the courts as a whole. Many patent trials involve some limited sittings in private. When the Patents Court sits in private, only individuals permitted to have access to the confidential documents under the confidentiality scheme are permitted to remain in court. The public, including the press and any third parties are excluded. Also excluded are any members of the receiving party’s legal team who are not covered by the confidentiality scheme as well as any employees of the receiving party itself who are not covered by the confidentiality scheme. The legal team and employees of the receiving party who remain in court are bound by the terms of the confidentiality scheme in relation to what happened when the court sat in private.

The parties well understand that sitting in private should only occur when it is strictly necessary and should be kept to a minimum. That is what happens in the Patents Court.

All of the features I have described above were present in this case. There is a confidentiality scheme in existence between the parties to deal with Smith & Nephew’s confidential disclosure. An interim r31.22(2) order was made at an early stage in this trial. Most of the trial took place in public but on a few occasions during trial the court sat in private for a time.

The confidential information was an important element of the evidence but when the judgment was prepared I sought to avoid unnecessary references to it insofar as that could be done. When it was handed down Smith & Nephew did not ask for any of the judgment to be kept confidential.

At the conclusion of the case Smith & Nephew sought a permanent r31.22(2) order in relation to various documents. A list was prepared. It is a long list but that is not sinister. It is a reflection of the fact that Smith & Nephew’s confidential information was at the heart of this case.

At paragraph 25(ii) of Lilly ICOS No. 2 the Court of Appeal made clear that simple assertions of confidentiality will not prevail. Smith & Nephew put in evidence to deal with r31.22. The evidence was that the documents concerned contained commercially sensitive information relating to Smith & Nephew’s manufacturing process and equipment, its dealings with regulatory authorities and/or its commercial strategy. No other details of these three categories were given.

Before the matter came to court I raised the matter with the parties. I was concerned that it was not obvious why it was appropriate to make such an order in relation to the two latter categories, i.e. documents which related to dealings with regulatory authorities and/or commercial strategy. This prompted Smith & Nephew to serve a further, full witness statement from Elizabeth Cohen which addressed the issues in more detail. The review which led to the preparation of Ms Cohen’s statement led to the identification of some documents for which Smith & Nephew no longer sought a permanent order.

Counsel for Smith & Nephew submitted that the evidence was sufficient to satisfy the court that an order should be made in relation to all the documents covered. Convatec did not object to the order sought by Smith & Nephew and did not attend for the majority of the discussion on this topic.

At the end of her witness statement Ms Cohen states that the collection of documents, taken together, paint a very detailed picture of Smith & Nephew’s development of Durafiber Ag and provide a window into its internal workings, information and know-how which it has built up upon years of experience in new product development. The information gives a useful insight into the development of manufacture for this type of product which could well amount to a competitive edge in the market. She also explains that representatives of at least one other producer operating in a similar area to Smith & Nephew was present in court for the duration of the trial save when it was sitting in private.

In relation to the large majority of the documents sought to be made the subject of an order, Ms Cohen’s evidence satisfies me that such an order is appropriate. These are the documents relating to Smith & Nephew’s manufacturing process and equipment and its commercial strategy. It is true that a number of these documents played a crucial role in court (c.f. Lilly ICOS No 2 para 25(ii)), nevertheless it is also the case that the outcome can be understood without them. While the evidence in its initial form was not sufficiently detailed or specific to justify such an order, the later witness statement addressed the matter in appropriate detail.

The nature and details of Smith & Nephew’s secret process had to be explored in this case. Justice could not be done without it. As the Court of Appeal recognised (Lilly ICOS No. 2 paragraph 25(vi)) patent cases present particular problems and parties should not be constrained to hold back from relevant or potentially relevant disclosure because of (legitimate) fears of the effect of publicity. I will make the order sought save for what follows.

There is one category of documents which requires separate consideration. As Smith & Nephew made clear, some of the documents for which they seek the order relate to dealings with regulatory authorities. The documents were relevant because they went to the springboard injunction question, particularly the time it would have taken to obtain CE Mark approval (see main judgment paragraphs 135-170). For example they include emails passing between Smith & Nephew staff and the regulatory bodies (BSI and MHRA) as well as internal emails relating to such communications. Some of these emails figured in the cross-examination of Mr Armstrong.

As Ms Cohen explains some of these regulatory documents attach or refer to other documents which give details of the process of manufacture. To that extent those regulatory documents also fall into the manufacturing process and equipment category and are covered by my decision above. The same goes for some of those documents which include details of development testing undertaken by Smith & Nephew for the same reasons.

However it is clear that some regulatory documents do not contain any details of Smith & Nephew’s manufacturing or development testing work nor its commercial strategy. Ms Cohen explained that these documents highlight the kinds of issues which may arise in the development of a product and process of this nature and highlight Smith & Nephew’s approach in dealing with the authorities queries in order to get the product through to launch. They demonstrate an insight into Smith & Nephew’s approach to gaining regulatory approval based on its many years of experience. She stated that the know-how that is contained in them belongs to Smith & Nephew.

Save for the regulatory documents which fall into the other categories I have already mentioned, I am not satisfied that a permanent r31.22(2) order should be made in relation to documents merely because they relate to Smith & Nephew’s dealings with regulatory authorities. I accept that Smith & Nephew have built up very substantial experience and know-how in dealing with regulatory authorities but I am not convinced that disclosure of these documents would reveal that know how or damage Smith & Nephew at all. For example I refer to an email chain at (Confidential) Bundle 11.4 pp63-65. This ends with an email from Bryan Emms at BSI to Susan McLoughlin at Smith & Nephew. It was discussed in evidence and relates to the issue of how long it would take to get CE mark approval. I cannot see how it could be said to disclose any Smith & Nephew know how.

The documents for which I am not prepared to make a permanent r31.22 order are only to be found within the set referred to in paragraphs 15 and/or 21 of Ms Cohen’s 12^th witness statement. I have divided the documents referred to in that set into two groups A and B below. Group A consists of the documents for which I am prepared to make a r31.22 order and the group B consists of those for which I am not prepared to make a 31.22 order. Any other documents not mentioned in EJC-14 will be covered by a 31.22 order. The details of the contents of the groups were not discussed at the hearing because it would not have been a sensible use of time to do so. In the draft judgment I invited Smith & Nephew to consider the two groups. They submitted that certain adjustments be made and I have accepted their submissions.

Group A, which will be covered by a r31.22 order are as follows. Although they are primarily regulatory in nature, they seem to me to include some references to manufacturing or process information or commercial strategy. They are:

Group B, which will not be covered by a r31.22 order are:

These documents in group B do not seem to me to contain any information which is sufficiently commercially valuable and secret to justify an order under r31.22(2), given the role they played relating to the decision in this case about springboard relief and the length of time it would have taken Smith & Nephew to obtain CE mark approval.

Finally I should mention one of the occasions in which the court sat in private at the trial. This was on day 2 for part of the cross-examination of Mr Armstrong. His evidence related to the regulatory issues. I have re-read the transcript of that portion of the trial [Day 2 Private p1-43]. There are references to documents and information which were regarded as confidential by Smith & Nephew but, as far as I can tell, nothing on the transcript embodies or reveals anything which ought now to be kept confidential. That does not mean it was necessarily wrong to sit in private because it may be that if the witness’ responses had been different other matters might have been covered which justified the privacy.

Since the status of this part of the transcript was not discussed at the hearing on 17^th January I will not finally conclude what to do but will permit Smith & Nephew to make submissions on this point when this judgment is handed down. Subject to anything further from Smith & Nephew, it seems to me that there is no reason why the transcript of that part of the trial should remain confidential and I propose to direct that the transcript of that part of the trial should be treated as a hearing in public. Such a direction could be regarded as being made pursuant to PD39 paragraph 1.12.