Del HC | [InterDigital v. Xiaomi] Constitution of a “two-tier” Confidentiality Club in Standard Essential Patents Litigation: Read why HC considered such an arrangement to be against the principles of natural justice & fair play

Delhi High Court: C. Hari Shankar, J., after a wholesome discussion, rejected the idea of the constitution of a “two-tier” Confidentiality Club proposed by InterDigital Technology Corporation, and instead suggested the terms for constitution of a single-tier Confidentiality Club.

Factual Background

Xiaomi Corporation has been sued by Interdigital Technology Corporation alleging infringement of Indian Patents Nos 262910, 295912, 298719, 313036 and 320182.

Standard Essential Patents (SEPs)

Xiaomi has been using the technology contained in Standard Essential Patents (SEPs) without obtaining the license from Interdigital.

Hence in view of the above, Interdigital has sought a permanent injunction against Xiaomi from manufacturing, selling, assembling, distributing, advertising, exporting, importing or using, in their devices, technology which infringes the SEPs.

In the alternative, a direction has also been sought to XIAOMI, to take a license from Interdigital, for usage of its SEPs, on fair reasonable and non-discriminatory (FRAND) terms to be fixed by this Court.

InterDigital filed IA’s under Oder XXXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 and Chapter VII Rule 17 of the Delhi High Court (Original Side) Rule, 2018.

Chapter VII Rule 17 of the Original Side Rules reads thus:

“17. Confidentiality Club. – When parties to a commercial suit wish to rely on documents/information that are commercially or otherwise confidential in nature, the Court may constitute a Confidentiality Club so as to allow limited access to such documents/information. In doing so, the Court may set up a structure/protocol, for the establishment and functioning of such Club, as it may deem appropriate. An illustrative structure/protocol of the Confidentiality Club is provided in Annexure F. The Court may appropriately mould the structure/protocol of the Club, based upon the facts and circumstances of each case.”

Confidentiality Club Regime is standard protocol, especially while dealing with litigations involving allegation of patent infringement.

Bench in the instant case is concerned whether the Confidentiality Club could be set up in the manner sought by InterDigital.

What kind of Confidentiality Club does Interdigital seeks to be set up?

It seeks setting up of a “two-tier” Confidentiality Club, comprising an “outer tier” and an “inner tier”. The documents which would be open to the members of the “outer tier”, are denoted, in the application of InterDigital, as “Confidential Information”, whereas the documents, to which members of the “inner tier” alone would have access, had been denoted as “Legal Eyes Only (LEO) Confidential Information”.

Parties, as well as their officials and employees, would have no access to the “inner tier” documents.

Mr Parvin Anand has stated that the exclusion of representatives of the parties, from having access to the inner tier documents is non-negotiable.

Bench posed two queries to Mr Parvin Anand, which were as follows:

  • How an advocate could be expected to be appropriately instructed, if he is unable to share, with his clients, the material on which the OP seeks to rely?
  • How the Court could come between the advocate and his client, insofar as the “inner tier” documents were concerned, and injunct the advocate from disclosing the documents to his client?

Wouldn’t the above-stated amount to an unwelcome and unjustified, incursion by the Court into the sacred space that exists between the client and counsel?

Mr Anand submitted that no occasion would arise for the Court to come in between the client and counsel as, if this Court were to accede to the prayer, of InterDigital, for setting up of the “two-tier” Confidentiality Club, it would be for Xiaomi to instruct its Counsel not to disclose, to it, the “inner tier” documents.

Court was befuddled with the above response and expressed that it does not understand how the Court could insist on Xiaomi contracting with its counsel to keep documents shown to its counsel and on which InterDigital relies against Xiaomi, undisclosed to Xiaomi itself.

Hence, the Court held that it cannot by judicial fiat, impose any such contractual dispensation between Xiaomi and its Counsel.

Bench’s opinion on setting up of ‘Confidentiality Club’

Bench in very clear words opined that the mere fact that Courts, overseas, may have acquiesced to the setting up of such Confidentiality Clubs cannot be of any substantial significance, in deciding the present application of InterDigital.

Bench relied on the decision of this Court in M. Sivasamy v. Vestergaard Frandsen A/S, 2009 (113) DRJ 820 (DB), wherein the following was the Court’s observation:

“…with respect to the litigation in India, the Courts in this country would be guided by the provisions of the Laws as applicable in this country and the pleadings in the suit in this court and not by any orders or decisions of the foreign court, unless, the decision of the foreign Court becomes final and so that it can operate as res judicata between the parties and operate in the parameters of Section 13 and Section 44-A of the Code of Civil Procedure, 1908.

No useful purpose will be served in making reference to various orders of the Courts in the different countries as one does not know what are the ingredients/requirements of causes of action of the different laws of those countries and what were the pleadings of the cases in the foreign courts.”

Bench needs to decide on whether “comparable patent licence agreement” could be justifiably included in an ‘inner tier’ of confidential documents, to be kept away from the eyes of the defendant, as well as all its officers and employees?

Court denied the prayer for keeping certain documents, and information, inaccessible to Xiaomi and its personnel, and allow access, thereto, only to the advocates and experts nominated by Xiaomi.

Whether “two tier” Confidentiality Club legally palatable in the mind of the Court or not?

In case the Court finds the request, of InterDigital, for setting up of a “two-tier” Confidentiality Club, to be acceptable, the benefit thereof would, naturally, ensure to Xiaomi as well. The question, therefore, is not whether Xiaomi would also get the benefit of such an arrangement, but of whether such an arrangement is, to the mind of the Court, legally palatable or not.

No civil suit, be it for enforcement of rights relating to intellectual property, or any other right, can claim innocence to the rigour and discipline of the CPC and the Specific Relief Act, 1963.

Further, the Court observed:

Whether either of the parties, to litigation, needs, or does not need, to see a particular document, would be a decision which essentially rests with the party itself.

Can InterDigital, simply put, assert that Xiaomi does not need to see a document on which InterDigital places reliance, to contest the case initiated by it against Xiaomi?

For the above-stated Court’s opinion was in negative and bench relied on the observations in the decision of Transformative Learning Solutions v. Pawajot Kaur Baweja, 2019 SCC OnLine Del 9229, in paras 23 and 24.

Adding to its observations Court also stated that:

Patent infringement, in the case of SEPs, has, however, a unique feature. A holder of a SEP is not entitled, of right, to seek an injunction against infringement of its SEP, merely on making out a case of such infringement. This, essentially, means that every holder of a SEP is required, in law, to agree to the licensing of its SEP to willing licensees.

Court noted that the plaintiff desires to include the license agreements in the ‘inner tier’ to be kept away from the eyes of the defendants as well as all their officers and employees.

Bench found the above suggestion to be completely antithetical to, and destructive of, the most fundamental notions of natural justice and fair play.

Court again stressed upon the fact that while penning this judgment, it is only addressing the prayer of InterDigital, for the constitution of a two-tier Confidentiality Club, consisting of “inner tier” and “outer tier” documents.

In line of the above position, Court remarked:

Permitting the constitution of such a Club would amount to granting blanket permission, to InterDigital, to keep certain documents away from Xiaomi, its officers and its employees.

Adding to the above, Court also stated that in case the parties are able to agree and arrive at a level playing field, then this judgment shall not come in the way of their doing so.

As the Bench is only concerned with the issue of whether such an arrangement as being discussed can, against its wishes be imposed on Xiaomi.

Court further dealt with the Annexure-F to the Original Side Rules which is cited as “an illustrative structure/protocol of the Confidentiality Club” which may be “appropriately moulded” by the Court.

Membership of the Confidentiality Club, constituted in the manner envisaged by Annexure F is, clearly, limited to three advocates and not more than two external experts. Mr Anand submitted, relying on this Annexure, that the parties, and their officials and representatives, may legitimately be excluded from the Confidentiality Club constituted by the Court.

Bench asserted that, if InterDigital can come to terms with Xiaomi, and they agree, ad idem, to the constitution of such a Confidentiality Club, in which “inner tier” documents would remain away from the prying eyes of InterDigital and Xiaomi, as well as their officers and employees, this order shall not stand in their way. As of today, however, Xiaomi is not agreeable to such an arrangement.

Client-Lawyer Relationship 

Further, stating that the client-lawyer relationship in Indian Law, has its own distinct incidents, Bench relied on the Supreme Court decision in Himalayan Coop. Group Housing Society v. Balwan Singh, (2015) 7 SCC 373.

Supreme Court in its’ decision of An Advocate v. B.B. Haradara, 1989 (1) ARC 72 (SC) and Om Prakash v. Suresh Kumar, 2020 SCC OnLine SC 100, iterated that the duty of advocates to act, at all times, under instructions from their clients.

SEP infringement litigation cannot be treated as a category sui generis, to which the principles enunciated in these decisions, as well as the Bar Council of India Rules, would not apply.

Court cannot trust such arrangements discussed above upon Xiaomi, without its consent, in the absence of any clear right having been established by InterDigital, for the imposition, on Xiaomi, of such an arrangement.

During the course of the hearing, the thought came to the Court several times that – What if XIAOMI is unwilling — as it is, in the present case – for the 3rd party license agreements, on which InterDigital relies, to be shown only to its advocates and experts, and not its own officials of personnel?

What if Xiaomi says that it is not willing to contract, with its counsel, to keep undisclosed, from Xiaomi, the documents which have been shown to him?

To the above, Mr Pravin Anand submitted that, having involved Xiaomi in a litigative exercise, by filing the present suit against it, InterDigital can insist on Xiaomi prosecuting the suit, and defending itself against InterDigital, without being shown the documents on which InterDigital proposes to rely.

Bench on hearing the above submission summarily rejected it.

Further, in Court’s view, there can be no question of this Court lending its approval to any arrangement in which the third-party license agreements, constituting the very basis of the case set up by InterDigital against Xiaomi, remain undisclosed to Xiaomi, as well as its officials and personnel and are shown only to advocates (who are not in-house counsel) and experts. Any such arrangement would violate the provisions of the Bar Council Rules as well as the law laid down in various decisions including, inter alia, Himalayan Coop. Group Housing Society v. Balwan Singh, (2015) 7 SCC 373.

No setting up of a “two-tier” Confidentiality Club

While concluding its decision, Court held that there is substance in Mr Pravin Anand’s submission that InterDigital cannot, very well, disclose details, in third-party license agreements which, as agreed between InterDigital and such third parties, are required to remain confidential. At the same time, InterDigital cannot, rely on such material against Xiaomi, holding the material back from the representatives of Xiaomi on the plea of confidentiality. InterDigital is, therefore, at liberty to redact, from the documents being treated as confidential, any such detail which, according to it, cannot be disclosed to any third party, including the representatives of Xiaomi.

Though if, Xiaomi agrees to the constitution of such a Club, then this Order would not stand in its way.

Bench held that instead of a “two-tier” Confidentiality club, a single-tier Confidentiality Club can be constituted in the following terms:

(i) Each party shall nominate four advocates, six representatives and two experts, who would constitute the confidentiality club.

(ii) The members of the confidentiality club alone shall be entitled to inspect the confidential information. In the case of the advocates and experts, such inspection would be to the extent such inspection is required in order to perform their professional duties in relation to the present proceedings on behalf of the party by whom they are engaged.

 (iii) The documents, regarded as “confidential information” would be filed in sealed cover, to be retained with the Registrar General of this Court under seal and in safe custody.

(iv) The members of the confidentiality club shall be entitled to inspect the confidential information before the Registrar General and, after the inspection is over, the documents and information shall be resealed and returned to the Registrar General.

 (v) The members of the confidentiality club shall be bound by confidentiality orders passed by this Court and will not be allowed to make copies, disclose or publish the contents of the confidential information or documents anywhere else or to any individuals who are not privy to the confidential information, including in other legal proceedings or oral and written communications to the press, etc.

(vi) During the recording of evidence and other proceedings of this Court with respect to the confidential information, or when the confidential information is being looked at, only members of the confidentiality club shall be allowed to remain present. Such proceedings will be conducted in camera.

  (vii) Any evidence, by way of affidavit or witness statement, containing confidential information shall also be kept in a sealed cover reflecting the confidential and designation, with the learned Registrar General, and would be accessible only to the members of the confidentiality club.

(viii) Neither party would be permitted to rely on any material which is not disclosed to the nominated representatives (as opposed to advocates and experts) of the opposite party. Should either party feel that any details, contained in any document, cannot be shown to the nominated representatives of the opposite party, it is at liberty to redact such details or particulars from the document(s) in question. Needless to say, the party that redacts any particular is, in any document or evidence, shall not be permitted to rely on such a redacted particulars. It shall, however, be open to the opposite party to plead that disclosure of such redacted material is necessary for its defence. In such a case, the court would decide, on a document-to-document basis, whether redacting of the “confidential” details, in the document, should, or should not, be allowed. This, in Court’s opinion, is the maximum extent to which the plea, of InterDigital, for keeping away, from the representatives of Xiaomi, “confidential” details and documents, can be accommodated.

(ix) The confidential documents/information shall not be available for inspection after disposal of the matter, except to the parties producing the same.

Hence, the application stands disposed of in the above terms. [Interdigital Technology Corpn. v. Xiaomi Corpn., 2020 SCC OnLine Del 1633, decided on 16-12-2020]


Advocates for the parties:

For the plaintiffs: Pravin Anand, Vaishali Mittal, Siddhant Chamola and . Pallavi Bhatnagar, Advocates.

For the Defendants: Saikrishna Rajagopal, Siddharth Chopra, Sneha Jain, Garima Sahney, Anu Paarcha, Dr Victor Vaibhav Tandon, Arjun Gadhoke and Charu Grover, Advocates.

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