Interdigital v. Xiaomi: Relevance for Defendant’s Rights beyond SEP Litigation

Recently, Nikhil covered InterDigital’s ongoing SEP (Standard Essential Patents) infringement dispute with Xiaomi, wherein a Confidentiality Club was proposed for sharing confidential documents to assess whether the licensing terms being offered by InterDigital were on FRAND (fair, reasonable and non-discriminatory) basis. The Delhi High Court in its recent order in the case rejected the plaintiff’s proposal to restrict access to certain confidential information from the defendant’s representatives, and to make it subject only to external eyes. In this post, I discuss the relevance of this decision to commercial civil suits beyond SEP litigation.

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Applicability of the Decision Beyond SEP Litigation

Nikhil notes in his post that the question of “application of this decision beyond SEP disputes might be slightly limited given that the harms through disclosure of confidential information in areas such as trade secrets might be substantially high to push for exclusion of interested parties who might unduly gain from such confidential information.”

However, in my reading of the judgment, the Court does not balance the harm caused to the plaintiff vs. the right of the defendant to access the information, on an equal footing. The Court does not deny that disclosure of information pertaining to comparable licensing agreements can cause “irreversible harm” to the plaintiff, as alleged. It in fact, acknowledges InterDigital’s business considerations as legitimate but notes that—”The business interests of InterDigital, howsoever legitimate, cannot prevail over the paramount consideration of grant of fair opportunity, and natural justice, to Xiaomi, to meet the case set up by InterDigital.” (para 53) The Court does not even consider it pertinent to really go into interrogating the degree of potential harm that may be caused or its permanence/irreversibility. The decision instead, pivots on recognising that “litigation cannot be a one-way street” and crucially notes that it is the plaintiff who has brought the defendant to Court—”InterDigital has invited Xiaomi into the arena, and not vice versa.” (para 29).

Further, the crux of the entire discussion on SEP litigation is that the defendant’s access to information in comparable license agreements is a relevant consideration for defending his suit and making an argument regarding the royalty rates being FRAND compliant or not. FRAND terms must be non-discriminatory by definition, which is why comparing rates with other license agreements becomes relevant. The Court notes:

“Whether, in extending a particular royalty rate to a licensee, for exploitation of its SEP, the plaintiff has discriminated, favourably or otherwise, qua that particular licensee, becomes, therefore, a relevant consideration, in assessing whether the rate extended to the licensee is, or is not, FRAND…….The damage that would ensue, to the fundamental principles of natural justice, fair play and due process, were the defendant to be excluded access from such allegedly “comparable” license agreements, is serious and irreparable. Any procedural arrangement, which is fraught with the possibility of such damage has, in my view, to be unequivocally jettisoned.” (para 28)

Therefore, in my opinion the applicability of this holding extends beyond SEP litigation to all cases involving trade secrets i.e., commercially valuable confidential information. This has a bearing on the defendant’s right to access information that is relevant to defend his case, regardless of that information being confidential in nature.

Trade secrets in India are protected only under contract law, or in the absence of a contract, under an equitable duty of confidence. This case makes it clear that the defendant cannot be excluded from accessing contractually protected confidential information, if such information is relevant for her to defend the suit. This is because concerns of fair play, equal opportunity and natural justice trump any interest that the plaintiff may have in keeping this information secret. The relevance of access to confidential information for the defendant is easy and intuitive to prove in SEP litigation. However, that in my opinion, would not render this decision inapplicable beyond SEP litigation, in other civil suits (including IP suits generally) where such relevance can similarly be proved.

In fact, the decision also relies on the Delhi high Court case of Transformative Learning Solutions Pvt Ltd. v. Pawajot Kaur Baweja, pertaining to the allegation of infringement of the plaintiff’s copyright in a customer’s list. The plaintiffs in this case had sought an injunction, against the defendants, from disclosing their confidential information and trade secrets, among other things.

The Delhi High Court in the present case quotes from paras 23 and 24 of Transformative Learning Solutions to note that:

“to ask the defendants to contest the suit without knowing the customers list in which copyright is claimed and without knowing what they are sought to be restrained from doing, would not only be unfair to the defendants but also would be contrary to procedure prescribed by law. The Advocates of defendants and experts, even if any possible in such scenario, cannot be expected to make pleadings, to meet the case of plaintiffs. The non-disclosure to the defendant sought by the plaintiffs, in my opinion deprives the defendant of opportunity of being heard and the right to defend the suit.”

The Court notes that as per Section 129 of the Civil Procedure Code, all High Courts are entitled to make rules to regulate their own procedure in the exercise of their original civil jurisdiction. The non obstante clause at the beginning of Section 129 indicates that Original Side Rules, framed by the High Court in exercise of the power conferred by Section 129 would prevail over anything to the contrary, that may be found in the CPC.

Rule 17 in Chapter VII of the Delhi High Court (Original Side) Rules, 2018, deviates from the regime of complete transparency, envisaged by Section 153B of the CPC. It permits parties to a commercial suit, who want to rely on confidential information, to request the Court to constitute a Confidentiality Club, “so as to allow limited access to such documents/information.” The question that arose in this case was whether such “limited access” could be so limited as to deny access to the opposite party, as well as its employees and officials, and limit access only to its nominated “ex-house” counsel and experts. The Court answered it based on the defendant’s right to access this information, where it is relevant to defend her suit. Therefore, the judgment should not be construed to be limited to just SEP litigation, and is a useful precedent to argue in favour of the defendant’s right to know in civil suits across the board where confidentiality clubs may be created.

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