On 17 February 2020 the Federal Court of Appeal reaffirmed the long-established practice of granting protective orders to parties involved in IP litigation before the Federal Court. In doing so, it set aside recent decisions in which the Federal Court refused to issue such an order, including instances where the order was sought with the consent of the parties. IP rights holders can now rest assured that the confidential information that they must exchange during the discovery phase of IP litigation will be governed and protected by a Federal Court order.
IP litigation often requires a party to provide confidential and highly sensitive financial, commercial, scientific or technical information to its opponent in the course of the discovery process. Naturally, IP rights holders will have concerns about disclosing their confidential information, especially where such information will be provided to a direct competitor. It is in this context that the Federal Court (where most IP litigation is heard in Canada) developed the practice of issuing protective orders, often with the consent of both parties, to govern the confidential information that they will exchange in the course of the written and oral discovery process. These orders are different from confidentiality orders which restrict the public's access to specific confidential information filed in the court's record.
Protective orders are subject to the court's control and are therefore enforceable by the court, including by way of contempt proceedings. Protective orders are thoroughly detailed and usually include:
- the type of information that the parties may designate as confidential information;
- a second confidentiality designation called 'counsel's eyes only information', which designates highly sensitive information (included in certain cases);
- limitation on the number and identity of individuals that can access the confidential information and counsel's eyes only information. These individuals must review the protective order and undertake to abide by its terms and conditions;
- the manner in which the parties must proceed to designate their information and documents;
- the process by which a party can challenge the confidentiality designations given by its opponent; and
- the procedure to be followed by a party that wishes to file its opponent's confidential information or counsel's eyes only information in the court record during the discovery phase or at any time before the trial.
A standard protective order template was developed over the years by IP practitioners and the Federal Court. Protective orders were routinely granted by the Federal Court in all IP litigation that proceeded to the discovery phase. However, in the past two years, some members of the Federal Court called into question this practice for various reasons and determined that they should decline to issue such orders, except in certain exceptional circumstances. This led to an inconsistent application of the Federal Court's procedure and practice, which in turn caused concern for IP litigants and practitioners alike. Without a protective order, the parties must resort to entering into private agreements with their opponents, a process which can often be difficult and ultimately is undesirable as it does not carry the same weight as a court-issued order. It was particularly troubling to litigants involved in IP litigation in the United States (where protective orders are routinely granted) that confidential information disclosed in parallel IP litigation before the Canadian Federal Court could potentially not benefit from a similar protective order.
The IP legal community had been waiting for the Federal Court of Appeal to clarify the conflicting positions adopted by the Federal Court. Finally, the opportunity arrived in March 2019 when Canadian National Railway appealed a Federal Court ruling which had dismissed a motion brought jointly by the parties for the issuance of a protective order. The IP Institute of Canada also intervened in the appeal to make representations on behalf of the IP legal community. The appeal was heard on 16 December 2019.
On 2 January 2020, before the Federal Court of Appeal issued its decision on this appeal, the Federal Court published a model protective order and a model confidentiality order on its website. These templates are intended to provide guidance to parties seeking such orders.
On 17 February 2020 the Federal Court of Appeal issued its judgment granting Canadian National Railway's appeal in Canadian National Railway Company v BNSF Railway Company (2020 FCA 45).
The Federal Court of Appeal confirmed in its reasons that the test to be followed by the Federal Court for the issuance of protective orders was the one stated by the Federal Court in AB Hassle v Canada (Minister of National Health & Welfare) (161 FTR 15, 1998 CarswellNat 2520 (FC Trial Div)), which provides as follows:
- The court must be satisfied that the disclosing party believes that its proprietary, commercial and scientific interests would be seriously harmed by producing information upon which those interests are based.
- In the event that a party challenges a confidential designation made by the disclosing party, in determining whether information is confidential, the court must be satisfied that the disclosing party's information has been treated as confidential at all times and that on a balance of probabilities, the disclosing party's proprietary, commercial and scientific interests could be reasonably harmed by the disclosure of the information.
The Federal Court of Appeal ruled that the motions judge had erred in applying the more stringent test for confidentiality orders described by the Supreme Court of Canada in Sierra Club of Canada v Canada (Minister of Finance) (2002 SCC 41).
The Federal Court of Appeal saw no reason why the Federal Court should depart from its longstanding practice of granting protective orders with the consent (or not) of parties, as long as the AB Hassle test is met and the protective order submitted to the Federal Court is in accordance with the protective order jointly developed over the years by the IP Bar and the Federal Court. The Federal Court of Appeal further indicated that the parties should adopt the practice of identifying portions of their draft protective order that have been added or removed from the template developed by the IP Bar and the Federal Court.
Canada remains an attractive option for high-stake IP litigation. Indeed, IP rights holders should not be reluctant to engage in litigation before the Federal Court as this decision confirms that their confidential information will remain protected and governed by a court-issued protective order.