IBM United Kingdom Limited v Lzlabs GmbH & Ors

Confidentiality designations made during disclosure do not determine the treatment of documents at trial. The party seeking continued confidentiality bears the burden of producing clear and cogent evidence, particularly for material placed in an inner confidentiality ring.

The court must balance open justice, the receiving party’s need for access to relevant evidence, the protection of confidential commercial and technical information, and the proper administration of justice. Confidentiality is relative, context-sensitive and fact-sensitive. Redaction should be limited to the confidential material where that is sufficient. Any review should focus initially on documents likely to be deployed at trial, without applying inflexible presumptions such as a general five-year rule.

The claimant brought proceedings concerning the alleged misuse of IBM mainframe software in the development of the defendants’ Software Defined Mainframe. The defendants disputed the claims and relied, among other matters, on contractual and statutory rights permitting observation, study, testing and interoperability.

The application concerned the designation and management of confidential documents for the forthcoming trial. A confidentiality ring had operated under an order made in December 2022. The claimant sought directions based on proposed categories of confidential information and a five-year rule of thumb. The defendants supported a review but opposed rewriting the existing order and sought a document-specific, staged process.

1. The application was determined by reference to the fundamental principle of open justice. Public access to proceedings, evidence and documents deployed at trial may be restricted only where necessary and proportionate to protect confidential information and in the interests of justice, under CPR 39.2.

2. The court must balance the receiving party’s need for unrestricted access to relevant documents against the disclosing party’s interest in preserving confidential commercial and technical information. The confidentiality ring was an appropriate and proportionate arrangement for disclosure in this technically complex dispute.

3. Disclosure designations are not conclusive at trial. A party seeking to maintain an existing level of confidentiality must provide clear and cogent evidence justifying it, especially where inner-ring protection is sought. The review must be conducted in context, having regard to the document’s content and its significance to the case.

4. Confidentiality is a relative, rather than absolute, concept. Information is confidential where it is not in the public domain or readily accessible and is communicated in circumstances importing an obligation of confidence. The definition of trade secret in Article 2 of the Trade Secrets Directive, replicated in regulation 2 of the Trade Secrets (Enforcement etc.) Regulations 2018, provides useful guidance but does not create a comprehensive set of rules for every document.

5. The proposed five-year rule of thumb was not suitable as a general presumptive rule in this dispute. The continuing confidentiality of technical and commercially sensitive information depended on the facts, including the nature of the software and the development process.

6. The parties were directed to continue a staged review, beginning with a core bundle comprising the pleadings, factual witness statements, experts’ reports and documents referred to in them. The review was to be undertaken by experienced lawyers, with redaction of only the confidential parts where possible. Further disputes were to be addressed at the PTR.

7. The hearing was adjourned to a date to be fixed for consequential matters.