TQ Delta LLC v Zyxel Communications UK Ltd & Anor (Rev 1)

An external-eyes-only confidentiality regime is exceptional. It should not ordinarily permit one party to exclude all its representatives from relevant parts of key documents. The court must balance confidentiality against the other party’s right to understand and meet the case, the role of the documents, and the practical duties of lawyers to their clients.

Peripheral documents whose disclosure would cause disproportionate commercial harm may justify restricted access. In exceptional cases, restricted access to more important documents may be justified at an interim stage. The burden lies on the party seeking to restrict access to justify the restriction.

This was a patent dispute concerning patents said to be essential to DSL standards and the terms of reasonable and non-discriminatory licences. The immediate application concerned the proposed confidentiality club. TQ Delta sought an external-eyes-only tier for highly confidential material, including earlier licence agreements. Zyxel sought access for two named individuals within its group.

The court considered whether such a regime should be approved generally and whether access to particular licence agreements should be restricted. The central issue was how confidentiality protection should be reconciled with natural justice, a fair hearing and the parties’ ability to conduct the RAND proceedings effectively.

1. The application was allowed in part. The court declined to approve a general external-eyes-only confidentiality tier, but ordered disclosure of the relevant licence agreements to the Confidentiality Club, subject to a 14-day stay enabling third parties to apply to set aside or vary the order.
2. External-eyes-only access is exceptional because it may prevent a party from seeing and discussing key documents with its lawyers, understanding the evidence and arguments, participating fully in the trial, and giving informed instructions on offers and evidence. A regime under which one party may designate any document as external-eyes-only, leaving the other party to apply for access, is wrong in principle.
3. The court applied the principles in Al Rawi v Security Service [2011] UKSC 34; [2012] 1 AC 531. Natural justice ordinarily requires a party to know the case and evidence against it. Confidentiality arrangements are a recognised exception, but a trial should not ordinarily proceed with a party denied access to evidence relied upon by the opponent.
4. The relevant balancing exercise requires attention to the nature of the secret, the parties’ position, the extent of disclosure, and the role the document is likely to play. Peripheral documents may justify external-eyes-only access where disclosure would cause unnecessary harm. Key documents require stronger justification, and access should ordinarily be available to appropriate representatives of the restricted party.
5. The licence agreements were likely to be key documents because the court might need to assess RAND terms by reference to comparable licences. The evidence did not establish that the restrictions in the Confidentiality Club, limiting access to two named individuals from Zyxel’s ultimate parent subject to undertakings, were insufficient. The burden lay on those seeking restriction, not on Zyxel to justify prima facie access.
6. The proposed blanket regime was incompatible with Article 6 of the European Convention on Human Rights, the principles of natural justice and lawyers’ obligations to share relevant information with their clients. Parties may nevertheless agree such a regime, as occurred in Unwired Planet [2017] EWHC 3083, and specific restrictions may be ordered in exceptional circumstances.

First-instance decision. The judgment itself does not state any earlier appellate history.