Schering Corporation v Cipla Ltd & Anor

A communication is protected by without prejudice privilege where, viewed objectively in its context, it was bona fide intended to form part of or promote negotiations. The court must assess the author’s reasonable intention and the message conveyed to a reasonable recipient. The heading “without prejudice” is relevant but not conclusive. An opening communication may attract privilege even if it asserts the sender’s confidence in its legal position, provided it also indicates a willingness to seek a mutually acceptable solution. A letter need not contain a conventional offer to qualify as a negotiating document.

The claimant, proprietor of a patent, brought infringement proceedings against the defendants. The proceedings relied solely on a letter in which the defendants asserted that the patent was invalid, proposed avoiding confrontation if an alternative commercial solution could be reached, and indicated that they might launch their products if no response was received.

The defendants applied to strike out the proceedings. The parties agreed that, if the letter was privileged, the claimant had no material on which to rely and the action had to be struck out. The issue was whether the letter was a negotiating document protected by without prejudice privilege.

1. Applicable principles. The privilege exists to promote the public policy of encouraging parties to settle disputes. The court must consider all the circumstances in deciding whether a communication was bona fide intended to form part of or promote negotiations. The relevant perspective is that of the reasonable recipient assessing the message conveyed by the document.
2. The words “without prejudice” do not conclusively determine privilege, but they are an important indication of the author’s intention and may reinforce the conclusion that the communication forms part of a negotiating process.
3. An opening communication may be privileged. An assertion of rights alone will ordinarily not be protected, but an opening statement may qualify where it is coupled with an offer, or an indication of willingness, to pursue a mutually acceptable settlement.
4. The letter was a negotiating document. Its assertions that the patent was invalid represented the defendants’ attempt to emphasise the strength of their position. Its reference to an alternative commercial solution acceptable to both parties indicated a willingness to negotiate and necessarily contemplated that the claimant would obtain something from the discussions. The later indication that the defendants might proceed if no negotiations occurred did not alter that overall message.
5. The letter was therefore protected by without prejudice privilege. The claimant could not refer to it in its particulars of infringement, and the action was struck out.