BETWEEN:
MERCK & CO., INC. and MERCK FROSST CANADA & CO.
Plaintiffs
and
BRANTFORD CHEMICALS INC.
Defendant
REASONS FOR ORDER
HUGHES J.:
[1] This is an appeal by way of a motion under Rule 51 from an order of a Prothonotary dated June 17, 2005wherein a Protective Order was granted but not entirely in the terms sought by the moving parties Merck & Co., Inc. and Merck Frosst Canada & Co. ("Merck"). Merck seeks a Protective Order entirely in the form requested by it from the Prothonotary subject to minor concessions made by Merck's counsel in the course of arguing this appeal.
[2] This is a classic action for patent infringement, hard fought as is typical of actionsbetween such parties as this. Earlier, an Order under Rule 107 was sought and refused to bifurcate financial issues from patent issues. The Court of Appeal upheld this ruling ((2005), 39 C.P.R. (4th) 254). Merck now seeks a Protective Order in which not only terms that are usual in such orders, and consented to by the Defendant, but also terms that are contested namely:
a) division of information considered by a party into three parts, Confidential, Highly Confidential and Highly Confidential Financial with several restrictions, particularly in the latter categories, as to who and how many persons can have access to the documents.
b) A requirement, in respect of the latter two categories, that persons accessing the documents provide undertakings as to confidentiality to the opposite party's lawyers (thus identifying potential witnesses, expert or otherwise); and
c) A requirement that outside persons accessing the documents in the latter two categories not be "employed by or providing services to [the parties] or any direct competitor of any Party."
[3] The Prothonotary reviewed Merck's draft and heard submissions; thereafter she made an Order in which:
(1) There was only one category of "Confidential" documents there was no further "Highly Confidential" as "Highly Confidential Financial" categories;
(2) The persons permitted, under the terms of the Order, including the signing of an acknowledgement as to the obligations of confidentiality, were not limited by number and were categorized as outside counsel for the parties, employees of the parties and Apotex Inc. who need to receive the information, experts or independent consultants retained by the parties, information and persons who authored as received the information in the course of their work and signed an acknowledgment.
[4] In giving brief reasons as to why the Order took this form the Prothonotary said:
Counsel for the parties agree that some form of protective order should issue to apply to the documents that will be disclosed during production and discovery in this proceeding. Counsel for the Plaintiffs also advised that this motion does not seek relief regarding whatever documents that are eventually to be filed with the Court in respect of which the parties may seek a confidentiality order that may seal certain documents from public access. The disagreement is with respect to the scope of the protective order, and the restrictions proposed by the Plaintiffs.
Having reviewed the evidence put forward by the parties in their motion material, I find the terms sought by Merck in their proposed protective order to be overly restrictive. The classification of documents into categories of "Confidential", "Highly Confidential" and "Highly Confidential Financial" information in the manner proposed, along with the restrictions placed on the Defendants with respect to their choice of co-counsel, experts, and what information to which the experts would have access would, I find, hamper the ability of the Defendants to conduct a proper and full defence in this proceeding.
[5] The test for review of an Order of a Prothonotary on an appeal such as this is not disputed, it is that of Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 (C.A.) as modified by Merck & Co. v. Apotex Inc. (2003), 30 C.P.R. (4th) 40 (F.C.A.) so as to read:
Discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:
a) the questions raised in the motion are vital to the final issue of the case, or
b) the orders are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts.
[6] Clearly, the questions raised here in respect of the form of the Protective Order are not vital to the final issue of the case. The question is whether, in the sense contemplated by the test, the disputed portions of the Order were "clearly wrong" as based upon a wrong principle or upon a misapprehension of the facts. I find that there was no such error in the Prothonotary's reasons or form of Order.
[7] A Protective Order in respect of documents or other materials to be furnished during the course of discovery in an action is not provided for in the Rules of the Federal Court. Instead, there is jurisprudence established to the effect that documents and like materials disclosed during the discovery process are subject to an implied undertaking. The classic authority in respect of the implied undertaking in the Federal Court is Canada v. Ichi Canada Ltd. (1991), 49 F.T.R. 254 per Reed J. at para. 19:
[19] An order will therefore issue requiring the plaintiff to produce a representative for discovery. The defendant will know from the rest of these reasons that an implied undertaking automatically arises so that information obtained on discovery is to be used only for the purposes of the litigation for which it is obtained. This does not, of course, restrict the use of any information which subsequently is made part of the public record. Nor does it affect the use of information which while obtained on discovery may also have been obtained from some other source. An implied undertaking cannot operate to pull under its umbrella documents and information obtained from sources outside the discovery process merely because they were also obtained on discovery. In addition, the implied undertaking does not prevent a party from applying, in the context of collateral litigation, for release from the implied undertaking, so that information obtained on discovery might be used in that litigation. This, however, is a matter to be determined in the context of that proceeding and not in this proceeding.
[8] Nonetheless, parties have sought and received orders, usually called "Protective Orders" which are much more specific as to how documents and other information is to be handled, who has access and so forth. Much of this arises because in the United Stateswhere parallel litigation is often occurring, such an Order has been granted. The terms in the Canadian litigation, mirror the United States Order, and an Order is often granted on consent. It is only when the parties disagree that this Court is asked to provide its views as to an appropriate form of Order.
[9] When the action reaches trial, or a motion is made in which disclosure of documents to the Court may include placing the document on the public Record of the Court, Rules 151 and 152 make provision for a specific Court Order. The Prothonotary was aware of this and distinguished such situation from the one at hand when she said in her Reasons "...this motion does not seek relief regarding whatever documents that are to be eventually filed with the Court...." This is the same issue as addressed by the Supreme Court of Canada in Atomic Energy of Canada Ltd. v. Sierra Club of Canada, [2002] 2 S.C.R. 522, namely, the form of Order under Rules 151 and 152.
[10] The issue here is the treatment of confidential documents during the discovery phase of an action. In this phase of an action three principles laid out by MacKay J. in Apotex Inc. v. Wellcome Foundation Ltd. (1993), 51 C.P.R. (3rd) 305 (F.C.T.D.) at page 311 have often been followed:
Moreover, there are three considerations that favour the grant of the order basically in the terms specified. First, those terms reflect the terms of protective orders granted upon consent in parallel litigation in the United States in which the parties here are directly or indirectly involved. There is merit in a case where parallel litigation is underway in the United States to have reasonably comparable protective orders, provided the terms are not contrary to principle or practice in this Court:
...
Second, while the terms of the order are broad in their application to information of all kinds, and in leaving the initiative to the producing party to designate what is confidential, by its terms the order also provides opportunity to a receiving party to object to the classification as confidential. If the objection is not resolved between the parties the Court shall do so on application, and the Court of its own motion may determine that information classed as confidential by a party shall not be so treated. Thus, the Court ultimately may control the "declassification" of information originally classified as confidential by a producing party.
The third consideration favouring the order, in my view, is the practice of this Court, as I understand it, in issuing protective orders in relation to information produced in discovery where a party believes in good faith that its commercial business or scientific interests associated with trade secrets may be seriously harmed by disclosure that is open to public assess:
...
[11] These considerations go to the question as to whether an Order should be granted at all. Here all parties agree that an Order should be granted, it is only the terms, including a "Highly" confidential category, that is in dispute.
[12] This Court has been circumspect in granting Orders that contains "Highly" confidential, or "counsel's eyes only" provisions. For example, Cullen J. in Pfizer Canada Inc., v. Novpharm Ltd. (1996), 70 C.P.R. (3rd) 176 (F.C.T.D.) said at page 180:
"... no evidence was adduced before me that satisfies me that the information that might be produced under a confidentiality order such as in sought by the respondents is in some way of a higher order of confidentiality than is usual."
[13] In Deprenyl Research Ltd. v. Canguard Health Technologies Inc. (1992), 41 C.P.R. (3rd) 228 (F.C.T.D.), Strayer J. said at pages 229-230:
"An order preventing counsel from showing relevant evidence to his client in order to get instructions, while not unknown, should only be granted in very unusual circumstances."
[14] Recently, Harrington J. in Merck & Co. v. Apotex Inc., April 14, 2004, 2004 F.C. 567 in considering a similar situation said at paragraphs 13 and 14:
| 13 The evidence in support of the application for the order was furnished by Jeffrey Spencer, Director, Marketing Planning of Merck Frosst Canada & Co. He swore that the market for the treatment and prevention of osteoporosis is competitive and expressed concern that if Merck's competitors were given access to confidential information it could advantage them in the market place. He had been informed by his solicitors that material normally filed in Court becomes part of the public record, and was advised by Merck's U.S. attorney that a protective order in similar form had been issued in the United States with respect to the same types of documents. ¶ 14 These "bald" statements may well support the need for a protective order, but they in no way justify interference with the normal solicitor-client relationship, and the right of a party in litigation to consult with outside experts. I must conclude, at least in these respects, that Prothonotary Milczynski misdirected herself on the law. No basis was put forward to support Merck's fear that employers of Apotex, or any outside expert hired by it, would make the confidential information available to the public, and especially to Merck's competitors. I can see merit in issuing an order similar to that in the United States which covers the same or similar patents in a case involving the same parties. However, Apotex is not party thereto and so cannot be said to be using Canadian litigation to circumvent a U.S. protective order.
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13 Les éléments de preuve qui ont été produits à l'appui de la demande ont été fournis par M. Jeffrey Spencer, directeur de la planification commerciale chez Merck Frosst Canada & Co. Il a déclaré sous serment que le marché du traitement et de la prévention de l'ostéoporose est concurrentiel et il a ajouté qu'il craignait que les concurrents de Merck soient avantagés sur le plan concurrentiel s'ils avaient accès aux renseignements confidentiels. Ses avocats l'ont informé que les pièces font partie du domaine public dès qu'elles sont versées au dossier de la Cour, et l'avocat américain de Merck lui a fait savoir qu'une ordonnance de confidentialité semblable avait été prononcée aux États-Unis relativement au même type de documents. ¶ 14 Ces affirmations "lapidaires" peuvent fort bien démontrer la nécessité d'une ordonnance de confidentialité, mais elles ne justifient nullement de nuire aux rapports normaux qu'entretiennent l'avocat et son client ou de porter atteinte au droit d'une partie au procès de consulter des experts extérieurs. Force m'est donc de conclure que la protonotaire Milczynski a commis une erreur de droit, du moins à cet égard. Aucune explication n'a été avancée pour justifier la crainte de Merck que les employeurs d'Apotex ou les experts indépendants qu'elle pourrait engager mettraient les renseignements confidentiels à la disposition du public et, plus particulièrement, à la disposition des concurrents de Merck. Il m'apparaît justifié de rendre une ordonnance semblable à celle qui a été prononcée aux États-Unis et qui vise les mêmes brevets ou des brevets semblables dans une affaire opposant les mêmes parties. Cependant, Apotex n'est pas partie au procès américain et on ne peut l'accuser de se servir du procès canadien pour se soustraire à une ordonnance de confidentialité prononcée aux États-Unis.
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[15] Thus, the Court is reluctant, save in unusual circumstances, to issue a Protective Order with "highly" confidential or "counsel's eyes only" provisions. In the circumstances of the present case the Prothonotary obviously believed that no such unusual circumstances were present. Counsel have not shown me anything in the record that she may have overlooked or interpreted incorrectly. There is no basis for intervening on appeal.
[16] One further matter was raised by Merck's counsel, that is that in the draft order presented by Merck to the Prothonotary it was only certain Merck information that was to be designated as "Highly Confidential Financial" whereas the Prothonotary in her Order as drafted, removed the restriction as to Merck information thus making it bilateral as well as just "Confidential".
[17] It was open to the Prothonotary to redraft the Order, including making the terms bilateral. While it was Merck's motion, the motion was for approval of Merck's draft, the Prothonotary disagreed with the draft and modified it. It was perfectly open for her to do so. There is sufficient support to be found in the Affidavit of Murthy, Brantford's (now Apotex Pharmochem Inc.) president, at paragraph 21:
21. The definition of "Highly Confidential Financial Information" is not bilateral. By this I mean that the Plaintiffs' financial information is to be protected, but not that of the Defendant. This is not appropriate or fair. The same level of confidentiality should apply to all parties. The disclosure of our financial information to our competitors would provide them with insight to our costs structure, marketing programs and business that would cause us significant, if not irreparable, harm. The Defendant's financial information is as confidential and valuable to the Defendant as the Plaintiffs' financial information is said to be to the Plaintiffs.
[18] The motion will therefore be dismissed. The parties have already agreed that costs should be in the cause, and it is so ordered.
JUDGE
Toronto, Ontario
October 4, 2005
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1780-03
STYLE OF CAUSE: MERCK & CO., INC. and MERCK FROSST CANADA & CO.
Plaintiffs
and
BRANTFORD CHEMICALS INC.
Defendant
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: OCTOBER 3, 2005
REASONS FOR ORDER: HUGHES J.
DATED: OCTOBER 4, 2005
APPEARANCES:
Allison Whyte Nowak FOR THE PLAINTIFFS
Richard Naiberg FOR THE DEFENDANT
SOLICITORS OF RECORD:
Ogilvy Renault LLP
Toronto, Ontario FOR THE PLAINTIFFS
Goodmans LLP
Toronto, Ontario FOR THE DEFENDANT