The Federal Court is willing to grant a restrictive protective order to protect commercially sensitive information disclosed during litigation if justified by unusual circumstances.
In Arkipelago Architecture Inc v Enghouse Systems Limited, the plaintiff brought an action for copyright infringement alleging that the plaintiff’s computer program was reproduced in the defendants’ software. A protective order was issued, by which certain information disclosed during the litigation would be protected by a “counsel’s and expert’s eyes only” (CEEO) designation, thus barring the plaintiff’s president from viewing this information. The court dismissed the plaintiff’s appeal of the issuance of the protective order, finding no error in the determination that there were unusual circumstances allowing for such an order.
The protective order issued by the court
The plaintiff requested a protective order that would have permitted access by designated employees of the parties, counsel for the parties and expert witnesses to confidential information produced during the litigation. In response, the defendants sought an order allowing the following types of highly confidential information to be designated as CEEO:
Proprietary and technical information relating to the source code, design, structure or architecture of the defendants’ software products;
Commercially sensitive confidential business information relating to the defendants’ current or future operations and activities; and
Confidential financial information relating to the performance of specific product lines of the defendants.
The case management judge (CMJ) granted the defendants’ request for a CEEO protective order with respect to the “threshold issues” of whether the defendants’ computer programs reproduce all or a substantial part of the plaintiff’s computer program, and whether the plaintiff’s program was the source of any infringing programs. This order limited access to this information to counsel for the parties and to expert witnesses. The plaintiff appealed the issuance of this order.
Principles governing a CEEO protective order
Justice Roussel found that the CMJ correctly reviewed and applied the legal principles applying to CEEO protective orders:
They should only be granted in unusual circumstances.
Harm to a commercial business or scientific interest caused by disclosure of the confidential information must be a serious threat to the interest and must be real, substantial and grounded in the evidence.
Preventing disclosure to the opposing party is a legitimate purpose of a protective order, where the parties themselves are competitors, and particularly where the evidence shows such disclosure could injure the interests of the other party.
The party requesting the protective order has the onus to show the need for a restriction that effectively prevents counsel from showing relevant evidence to his client in order to get instructions.
No need for a principal to see highly confidential information to conduct the litigation
The court found the CMJ did not mischaracterize the plaintiff’s “bald assertions” that its president needed access to the information to properly instruct counsel, as no reasons were put forward apart from stating it did not have in-house counsel. Justice Roussel acknowledged that the absence of in-house counsel may justify refusing a CEEO designation, depending on the facts of each case. In this case she found that the CMJ considered this fact and the plaintiff’s expert witness would be able to assist in explaining the information to the plaintiff’s president.
The court also found that the CMJ properly balanced the plaintiff’s ability to conduct the litigation and protecting the highly confidential information. This was balance was struck by limiting the CEEO designation to information relevant to the threshold issues, and by allowing the plaintiff to challenge the designation for documents believed to be necessary for conduct of the litigation.
Risk of harm from disclosure of restricted confidential information
The court noted the commercially sensitive information covered by the CEEO designation is the source code of the defendants’ computer programs, the parties are direct competitors, and the plaintiff’s president is also the plaintiff’s sole employee. Justice Roussel found that the plaintiff’s president would not be able to unlearn any sensitive information, which would give the plaintiff a commercial advantage in making business decisions, even if there was no intention to misuse the information.
Restrictive protective orders can still be obtained
Despite the court’s recent refusal to issue a routine protective order on consent of the parties, this decision demonstrates that protective orders with very restrictive terms can be obtained from the court if justified by unusual circumstances. It also shows the court is cognizant of the sensitivity of highly confidential information that may need to be disclosed during litigation, and will provide measures that balance protection of this information with the ability of the parties to conduct the litigation. A party seeking such a protective order should not make bald assertions that the order is needed, but should ensure its request is well founded and supported by the evidence.