The Federal Court of Appeal has recently put to rest concerns about the availability of “protective orders” in IP litigation.
In IP litigation, parties are often required to disclose confidential and commercially sensitive information during the discovery process. This can be a significant concern, in particular when the confidential information is being disclosed to a direct competitor.
In Canada, confidential information can be protected through two types of orders with distinct purposes, namely:
- “Protective Orders” which apply only to the disclosure and handling of confidential information by the parties and others involved in litigation (for example, experts); and
- “Confidentiality Orders” governed by Rule 151 of the Federal Courts Rules which restrict access to confidential information contained in materials filed with the Court, which are normally accessible to the public.
For decades, the granting of protective orders was an entrenched practice in IP proceedings before the Federal Court (where most Canadian IP disputes are litigated) and were routinely granted on consent. In fact, a standard template for protective orders had been developed over the years by the IP Bar and the Federal Court.
However, over the past couple of years, the availability of protective orders had become uncertain as a result of several conflicting decisions from the Federal Court (see for example: Live Face on Web, LCC v. Soldan Fence and Metals (2009) Ltd., 2017 FC 858; Seedlings Life Science Ventures LLC v. Pfizer Canada Inc., 2018 FC 443, reversed in Seedlings Life Science Ventures, LLC v. Pfizer Canada Inc., 2018 FC 956; Canadian National Railway Company v. BNSF Railway Company, 2019 FC 281; dTechs EPM Ltd v British Columbia Hydro & Power Authority, 2019 FC 539; and Paid Search Engine Tools, LLC v Google Canada Corporation, 2019 FC 559).
One of the issues raised in this recent jurisprudence was whether the established test for “protective orders” in the Federal Court set out in AB Hassle v. Canada (Minister of National Health and Welfare) had been supplanted by the more stringent test for “confidentiality orders” set out be the Supreme Court of Canada in Sierra Club of Canada v. Canada (Minister of Finance).
Under the AB Hassle test, the moving party has to establish that:
- it believes that its proprietary, commercial and scientific interests would be seriously harmed by producing information upon which those interests are based; and
- in the event a party challenges a confidential designation made by the other party, in determining whether information is confidential, the Court must be satisfied that it has been treated confidential by the disclosing party at all relevant times and that on a balance of probabilities, the disclosing party’s proprietary, commercial and scientific interests could reasonably be harmed by the disclosure of information.
Under the more stringent Sierra Club approach, the moving party also has to demonstrate that the order was “necessary” because “reasonably alternative measures” would not prevent the risk of harm.
Federal Court of Appeal Decision
In Canadian National Railway Company v. BNSF Railway Company, 2020 FCA 45, the Federal Court of Appeal firmly rejected the more stringent approach.
In a unanimous decision, the Federal Court of Appeal held that the lower court had erred in law in conflating the established Federal Court test for protective orders in AB Hassle with the more onerous test of a confidentiality order set out in Sierra Club. In summary, the Court of Appeal stated that:
“In short, there is no justification for applying the same onerous Sierra Club test that is applied to confidentiality orders to protective orders. Confidentiality orders are squarely meant to circumvent the open court principle, while protective orders are instead used in instances where the open court principle is not engaged.”
The Federal Court of Appeal noted that although the Federal Court is in no way obliged to grant a protective order, there were no significant and compelling changes to the law that justify the refusal to grant a protective order if (a) the AB Hassle test is met and (b) the protective order submitted was in accordance with template jointly developed by the Intellectual Property Bar and the Federal Court.
The Court of Appeal also affirmed the importance of protective orders for IP litigants as they provide structure and enforceability in ways the implied undertaking, or private agreements, cannot, and were consistent with “modern, efficient, effective and proportional litigation” and added support to the Federal Court’s efforts to streamline complex IP litigation.
This decision provides a welcome clarification of the recent conflicting jurisprudence from the Federal Court on the granting of protective orders in IP litigation. IP owners can now be assured that protective orders remain available in litigation in the Federal Court to protect confidential information exchanged during the discovery process.