Schutz DSL (Australia) Pty Ltd v VIP Plastic Packaging Pty Ltd

CONSIDERATION 8 In the absence of any evidence as to the terms of Mr Perkins' employment as general counsel, or with respect to his position as company secretary, the Court is left with the knowledge that he is both an officer of Geminda with statutory and common law duties as well as being a legal practitioner and legal adviser to Geminda. Any information provided to Mr Perkins, if he has access to the confidential documents, may place him in a situation where his undertaking to the Court and Schutz could conflict with his obligations to Geminda as such an undertaking could be inimical to his obligations to act in the best interests of Geminda. Even if that inherent conflict of obligations can be resolved, there remains a risk that Schutz's commercially sensitive and confidential information may be quite inadvertently misused by VIP. Once the information is learned by Mr Perkins it cannot necessarily be forgotten. In Conor Medsystems Inc v University of British Columbia (No 4) [2007] FCA 324 Finkelstein J said (at [7]-[8]): 7 When deciding whether or not to make a protective order to protect trade secrets United States courts strike a balance between, on the one hand, the need for full and open discovery and, on the other, the need to protect parties from a misuse of trade secrets by competitors. Striking the right balance will present difficulties in the case of in-house counsel. 8 In-house counsel are not automatically denied access to an opponent's confidential information: R R Donnelley & Sons Co v Quark Inc 2007 US Dist Lexis 424. But if in-house counsel is involved in "competitive decision-making" a protective order is often made. It has been said that involvement in competitive decision-making is the "crucial" or "decisive" or determinative factor in denying in-house counsel access to confidential information: Brown Bag Software v Symantec Corp (1960 F.2d 1465, 1470 (9th Cir, 1992)); Glaxo Inc v Genpharm Pharmaceuticals Inc 796 F.Supp 872, 874 (ED NC, 1992); Carpenter Technology Corp v Armco Inc 132 FRD 24, 27 (ED Pa, 1991). 9 At [9] and [10] his Honour referred to Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 and Roussel Uclaf v ICI (No.2) [1990] RPC 45, a case which followed Warner-Lambert, continuing (at [11]-[13]): 11 The leading Australian case is Mobil Oil Australia Ltd v Guina Developments Pty Ltd (1995) 33 IPR 82. Roads Corporation, sometimes known as VicRoads, a statutory corporation, had called for expressions of interest for the development of a service centre. Mobil was the successful tenderer. Guina Developments sued VicRoads for a declaration that its choice of Mobil was invalid. The parties were required to make discovery. VicRoads objected to the production of documents that disclosed trade secrets (rates of return) that had been provided to it by Mobil, which was then joined to the action to protect its interests. The judge ordered the documents be disclosed. Mobil successfully appealed. The judgment of the Court of Appeal was delivered by Hayne JA (as he then was). He said first (33 IPR at 87) that merely because documents contained confidential information that did not ordinarily constitute a sufficient reason to deny inspection. In most cases in his opinion the rule that the information could not be used except for the purposes of the litigation was a sufficient measure of protection. But Hayne JA said that disclosure of confidential information to a trade rival fell into a different category. The reason was that "Once the documents are inspected by the principals of the trade rival the information which is revealed is known to the trade rival and cannot be forgotten." (33 IPR at 87). There was also the problem that the party whose information has been disclosed will likely never know when and how the information has been used. Hayne JA went on to say (33 IPR at 88) that the problem facing the court was "one of balancing the needs of a party to the litigation and the legitimate concern of a trade rival to retain secrecy of commercially sensitive information". That would justify distinguishing between a party and its advisers making it permissible, in an appropriate case, to deny inspection to a party but not to its lawyers and experts. He said (33 IPR at 89) that it was not possible to frame a rule that covered all cases but "each case will fall for determination, according to its own facts. In particular the nature and the content of the disputed documents is a matter that will usually, if not invariably, be of great importance in forming a conclusion and, if that is so, it will be appropriate for the judge to inspect the documents concerned." 12 As is apparent from a review of the cases, the problem that confronts the court is the risk of inadvertent or accidental disclosure. The risk is two-fold. First, it involves the unconscious use of confidential information. That is to say, information which once in a person's possession cannot be distinguished from other information in the person's possession. The other kind of inadvertent use is when it is impossible to ignore the confidential information once it is known. That is the kind of inadvertent disclosure, I think, Hayne JA had in mind in Mobil. 13 There is another risk to guard against in the case of disclosure of extremely potent information to in-house counsel, although the risk is not confined to in-house counsel. Providing confidential information to in-house counsel could produce a conflict between his duty of loyalty to his principal and his duty to keep the confidential information to himself. This could place in-house counsel in a position of great difficulty. Proper advice may not be forthcoming. Counsel's hands may be tied in the further conduct of the litigation. It may make it impossible to avoid unwitting disclosure in a prolonged working relationship. These are all dangers that, in some cases, need to be fended against. 10 It seems to me very likely that at an appropriate time Mr Perkins should and will have access to the confidential material but at this stage I am not convinced the necessity has arisen. There is some awkwardness involved in the taking of instructions on the part of VIP but VIP have managed so far. 11 The reliance upon Alphapharm points to the prematurity of the current motion because the order in that case (by Lindgren J) was after discovery had been given. At the time of pursuit of the motion in this proceeding, discovery categories have not yet been agreed. 12 The advantage in the application being made after discovery is that it affords an opportunity to deal with documents actually discovered and in respect of which commercial confidentiality has actually been claimed. The parties should give discovery and inspection and then VIP should pursue the motion for discovery by reference to identifiable categories of documents. 13 None of these observations is for a moment intended to suggest that a legal practitioner in the position of Mr Perkins would not fully understand the undertaking given. But rather than potentially placing him in a position of difficulty with competing obligations, the appropriate time to consider the motion for access is once discovery has been given and specific confidential documents have been identified. 14 Accordingly, the orders to be made will be: 1. That the motion for access to documents and exhibits by the respondents/cross-claimants in-house legal counsel be dismissed. 2. The respondents/cross-claimants pay the applicants/cross-respondents' costs of the motion. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.