Protection of Secrets in Patent Infringement Proceedings

02 June 2020

The need to strengthen procedural protection of secrets in patent infringement proceedings has recently taken shape. The "Entwurf eines Zweiten Gesetzes zur Vereinfachung und Modernisierung des Patentrechts" ("Draft of a Second Act for the Simplification and Modernisation of Patent Law")[1] contains a new Sec. 145a German Patent Act (PatG) providing that protective mechanisms of the Trade Secrets Protection Act (GeschGehG) also apply to patent litigation. This suggestion has received enormous support[2]. The implementation is probably only a matter of time.



In the meantime, the status quo continues to apply. However, the debate regarding the current situation is at times limited to the restricted scope of application of Secs. 172 no. 2, 174 (I), (III) German Judicature Act (GVG), which does not offer particularly effective protection of confidential submissions in relation to the adversary. Against this background, the present article addresses several ways of achieving protection of secrets in patent infringement proceedings nevertheless.

I. Speech is silver, but silence is golden

The most effective protection of a secret is to not disclose it. This level of protection is not even achieved by court orders or non-disclosure agreements. It is to be examined carefully based on the burden of presentation and proof and the specific substantiation requirements whether, and to what extent, information is to be disclosed in proceedings. Anyone who prematurely ignores this bears the risk of unnecessarily disclosing their trade secret with an "anticipatory over-substantiation".

1. Basic Rule Regarding the Burden of Presentation and Proof

The basic rule is that the party attempting to obtain a favourable legal consequence from particular facts and circumstances must present and, if necessary, prove the factual premises thereof. Consequently, the claimant bears the burden of presentation and proof for any facts on which the claim is based, and the party against which the claim is directed for the circumstances for justifying the objections and defences. Different rules may arise from statutory regulations, such as a reversal of the burden of proof (cf. Sec. 139 (3) 1st sentence German Patent Act).

2. Secondary burden of presentation

The secondary burden of presentation bears enormous practical significance. It steps in if the party bearing the primary burden of presentation is not included in the relevant course of events and is not capable of ascertaining the facts and circumstances on its own initiative, whereas the adversary is able and may be reasonably expected to provide the necessary clarification.[3] Under these circumstances, simple disputing is not sufficient. The party not bearing the burden of proof must instead substantiate (to a possible and reasonable extent) the facts and circumstances in support of the opposite.[4]

3. Interplay between submissions and counter-submissions

An interplay between submissions and counter-submissions exists with regard to the specific substantiation requirements for the parties' statements. The more detailed the submission of the party bearing the burden of presentation, the higher the burden of explanation of the adversary. If the latter has made a sufficient counter-submission, it is in turn the responsibility of the party bearing the burden of presentation and proof to supplement its submission of facts and break it down in detail.[5]

4. Case example

The significance of these principles for the protection of secrets can be illustrated with a prominent example. In the matter of Qualcomm / Apple[6], the question of infringement depended, among other things, on whether an iPhone chip in dispute contained an "offset" in accordance with the patent. The plaintiff submitted based on a teardown report that this had to be the case for technical reasons as the effect in accordance with the patent could otherwise not occur. The defendant then submitted technical counter-arguments. However, to protect its secrets, it did not explain and present any circuit diagrams of the chip in dispute. The Regional Court deemed the defendant's disputing insufficient and found for the plaintiff. The chamber stated that the defendant would have had to specifically demonstrate how the attacked embodiment actually functioned without an offset.

In its decision on the preliminary termination of enforcement, the Higher Regional Court of Munich held a different opinion.[7] It stated that considerable disputing was already present if the defendant demonstrated at least one technical possibility how the attacked embodiment could function without an offset. It further stated that no evidence was necessary, and that, rather, it would have been - precisely the other way round - for the plaintiff (who initially bore the burden of presentation and proof) to further specify and prove its submission of facts thereafter.[8]

The example shows: even in a procedural situation that is already critical with respect to the trade secret, a considerable (counter-) submission does not necessarily require disclosure of said secret.

II. Protection of secrets where submissions are required

If the procedural situation requires a submission on the trade secret, the question arises whether protective mechanisms exist for protecting said submission against the other procedural parties. Several courts, including the German Federal Court of Justice, affirmed this and expressly pointed out specific possibilities.

1. Order pursuant to Sec. 142 German Code of Civil Procedure (ZPO)

An interest in secrecy does not necessarily have to aim to deny the adversary the information. Rather, the disclosure is often opposed by a contractual non-disclosure obligation towards a third party.
In this case, the contractual relationship with the third party should be analysed thoroughly at an early stage. Usually, contractual non-disclosure clauses contain certain exceptions, according to which, for example, information may be disclosed if this is required by law or if a court decision has been issued to that effect. Sec. 142 (I) German Code of Civil Procedure may be considered as a legal basis for this. Accordingly, the court may order a party to present any documents and other records it possesses and has referred to. Several courts (at least in "FRAND cases") have confirmed up to now that they are willing to make use of this possibility to enable the holder of the information to present the documents in compliance with its non-disclosure obligation.[9] In addition, the Regional Court of Munich I pointed out that it would make an order for presentation conditional upon a non-disclosure agreement having been concluded out of court beforehand.[10]

2. Filing of partially blacked-out documents + order of non-disclosure measures

Another possibility recently pointed out by the German Federal Court of Justice is to initially only file a partially blacked-out version of the relevant documents and ask the court to order appropriate non-disclosure measures as a prerequisite for filing a version that is not blacked-out.[11] The German Federal Court of Justice stated that if the party filed documents without such a safety mechanism, it had to expect that they are made available to the other procedural parties regardless of the trade secrets contained therein.

In its grounds for the decision, the German Federal Court of Justice refers, inter alia, to the case law of the Higher Regional Court of Düsseldorf[12] . The latter also clarified that a party submitting trade secrets "at an early state without appropriate safety precautions" accepted the risk that they become known to the adversary without any protection. It stated that therefore, the party had to "ensure that a non-disclosure agreement with the adversary is achieved beforehand". It also pointed out that if the adversary - irrespective of considerable interests in secrecy (which, however, have to be demonstrated) - refused to conclude a non-disclosure agreement, the party with the secret could - without disadvantage - limit its submission in the proceedings in such a way that the trade secret was not endangered.

3. Interim result

If a submission on a trade secret is necessary, it must be ensured meticulously that any confidential information is identified accordingly and "separably" incorporated into the submission, so that the corresponding passages may be blacked-out reasonably. Upon filing, the disclosure may be made conditional upon the court ordering appropriate non-disclosure measures. In the decision cited above, the German Federal Court of Justice does not specify which measures are possible. In any case, the parties should attempt to conclude a non-disclosure agreement at an early stage, and the above approaches may definitely serve as leverage in this regard.

4. Trade Secrets Protection Act already applied de lege lata by "door-opener request"?

For the sake of completeness, at this point reference shall be made to a suggestion recently put forward by Zhu and Popp[13]. They stated that it should also be possible to make a preventive claim for injunctive relief pursuant to Sec. 6 2nd sentence Trade Secrets Protection Act in patent infringement proceedings in the scope of objective accumulation of claims or the counter-claim, which could already achieve applicability of the protective mechanisms of the Trade Secrets Protection Act de lege lata.

Conclusion

Although procedural protection of secrets (still) has its shortcomings, thorough examination of the burden of presentation and proof along with an accordingly moderate submission may offer effective protection in individual cases. If a confidential submission is (potentially) necessary in the proceedings, means of protection are available in this regard as well. If information has not yet been safeguarded by a non-disclosure agreement, only a partially blacked-out version of the relevant briefs should be initially filed, and the court should be asked to take non-disclosure measures. It remains to be seen whether the "premature" application of the protective mechanisms of the Trade Secrets Protection Act by means of a "door-opener request" will establish itself.

The full article was originally published in German in June 2020 in publication "Intellectual Property Magazine".

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Footnotes:

[1] Retrievable under: https://www.bmjv.de/SharedDocs/Gesetzgebungsverfahren/Dokumente/DiskE_2_PatMoG.pdf?__blob=publicationFile&v=1 (last retrieved on May 18, 2020).
[2] Cf. the numerous statements on the draft, retrievable under: https://www.bmjv.de/SharedDocs/Gesetzgebungsverfahren/DE/PatMoG_2.html (last retrieved on May 18, 2020).
[3] German Federal Court of Justice, NJW 2016, 3244 et seqq., marginal no. 18
[4] German Federal Court of Justice, NJW 2008, 982 et seqq., marginal no. 16.
[5] German Federal Court of Justice, NJW 2018, 1089 et seqq., marginal no. 19.
[6] Judgment of December 20, 2018 - 7 O 10495/17 = BeckRS 2018, 33489.
[7] Decision of April 9, 2019 - 6 U 4653/18 = GRUR-RS 2019, 41076.
[8] Cf. also Kühnen, Patent Litigation Proceedings in Germany, 12th edition, chapter E, marginal nos. 145 et seqq.
[9] Regional Court of Mannheim, judgment of September 4, 2019, 7 O 115/16; Instructions on handling requests for confidentiality in and outside oral hearings in patent litigation before the Regional Court of Munich I (as per February 2020), p. 2.
[10]; Instructions on handling requests for confidentiality in and outside oral hearings in patent litigation before the Regional Court of Munich I (as per February 2020), p. 2.
[11] German Federal Court of Justice, decision of January 14, 2020 - X ZR 33/19 = NJW-RR 2020, 246.
[12] Decision of April 25, 2018 - I-2 W 8/18 = BeckRS 2018, 7036.
[13] GRUR 2020, 338 et seqq.;


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