Canada’s Intellectual Property Firm

The Federal Court is back on track: IP holders will continue to benefit from protective orders in intellectual property litigation

Authored byJean-Sébastien Dupont and Julie E. Larouche

On February 17, 2020, the Federal Court of Appeal reaffirmed the long-established practice of granting protective orders to parties involved in intellectual property litigation before the Federal Court in Canada. In doing so, it set aside recent decisions where the Federal Court had refused to issue such an order, including instances where the order was sought on consent by the parties. IP right holders can now rest assured that the confidential information they are required to exchange during the discovery phase of IP litigation will be governed and protected by an order of the Federal Court.

The Appellant in this matter was successfully represented by François Guay, Jean-Sébastien Dupont and Julie E. Larouche of Smart & Biggar’s Montreal office.

IP litigation often requires a party to provide confidential and highly sensitive financial, commercial, scientific and/or technical information to its opponent in the course of the discovery process. Naturally, IP right holders will have concerns about the disclosure of their confidential information, especially where such information will be provided to a direct competitor. It is in this context that the Federal Court (where most IP litigation is heard in Canada) developed the practice of issuing so-called protective orders, often on consent of both parties, to govern the confidential information that is to be exchanged by the parties in the course of the written and oral discovery process. These orders are different from confidentiality orders which restrict the public’s access to specific confidential information that is filed in the Court’s record.

Protective orders are subject to the Court’s control and are therefore enforceable by the Court, including by way of contempt proceedings. Protective orders are thoroughly detailed and usually include:

  1. The type of information that the parties may designate as “Confidential Information”;
  2. In certain cases, a second confidentiality designation called “Counsel’s Eyes Only Information” will be included in the order to designate highly sensitive information;
  3. Limits on the number and identity of individuals that can access “Confidential Information” and “Counsel’s Eyes Only Information”. These individuals are required to review the protective order and must undertake to abide by its terms and conditions;
  4. The manner in which the parties must proceed to designate their information and documents;
  5. The process by which a party can challenge the confidentiality designations given by its opponent;
  6. The procedure to be followed if a party wishes to file its opponent’s “Confidential Information” or “Counsel’s Eyes Only Information” in the Court record during the discovery phase or at any time before the trial;

A standard protective order template was developed over the years by IP practitioners and the Federal Court. Protective orders were routinely granted by the Federal Court in all IP litigation that proceeded to the discovery phase. However, in the past two years, some members of the Federal Court called into question this practice for various reasons and determined that they should decline to issue such orders, except in certain exceptional circumstances. This led to an inconsistent application of the Federal Court’s procedure and practice which in turn caused concern for IP litigants and practitioners alike. Without a protective order, the parties must resort to entering into private agreements with their opponents, a process which can often be difficult and ultimately is undesirable as it does not carry the same weight as a Court sanctioned order. It was particularly troubling to litigants involved in IP litigation in the United States (where protective orders are routinely granted), that confidential information disclosed in parallel IP litigation before the Federal Court in Canada could potentially not benefit from a similar protective order.

The IP legal community had been waiting for the Federal Court of Appeal to clarify the conflicting positions adopted by the Federal Court. The opportunity arrived at last in March 2019 when Canadian National Railway (“CN”) appealed a ruling of the Federal Court which had dismissed a motion brought jointly by the parties for the issuance of a protective order. The Intellectual Property Institute of Canada (IPIC) also intervened in the appeal to make representations on behalf of the IP legal community. The appeal was heard on December 16, 2019.

On January 2, 2020, before the Federal Court of Appeal issued its decision on this appeal, the Federal Court published a model protective order and a model confidentiality order on its website. These templates are intended to provide guidance to the parties seeking such orders.

On February 17, 2020, the Federal Court of Appeal issued its judgment granting CN’s appeal in Canadian National Railway Company v BNSF Railway Company, 2020 FCA 45.

The Federal Court of Appeal confirmed in its reasons that the test to be followed by the Federal Court for the issuance of protective orders was the one stated by the Federal Court in AB Hassle v Canada (Minister of National Health & Welfare), 161 FTR 15, 1998 CarswellNat 2520 (FC Trial Div.):

  1. The Court must be satisfied that the disclosing party believes that its proprietary, commercial and scientific interests would be seriously harmed by producing information upon which those interests are based.
  2. In the event a party challenges a confidential designation made by the disclosing party, in determining whether information is confidential, the Court must be satisfied that the disclosing party’s information has been treated as confidential at all times and that on a balance of probabilities, the disclosing party’s proprietary, commercial and scientific interests could be reasonably harmed by the disclosure of the information.

The Federal Court of Appeal ruled that the motions judge had erred in applying the more stringent test for confidentiality orders described by the Supreme Court of Canada in Sierra Club of Canada v Canada (Minister of Finance), 2002 SCC 41.

The Federal Court of Appeal saw no reason why the Federal Court should depart from its longstanding practice of granting protective orders on consent (or not) of parties, as long as the AB Hassle test is met and the protective order submitted to the Federal Court is in accordance with the protective order jointly developed over the years by the Intellectual Property Bar and the Federal Court. The Federal Court of Appeal further indicated that the parties should adopt the practice of identifying portions of their draft protective order that have been added or removed from the template developed by the IP Bar and the Federal Court.

Canada therefore remains an attractive option for high-stake intellectual property litigation. Indeed, IP holders should not be reluctant to engage in litigation before the Federal Court of Canada as this decision confirms that their confidential information will remain protected and governed by a court-issued protective order.
For further information on protective orders in intellectual property litigation please contact a member of our IP Litigation team.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.