UK Court clarifies applicability of “external eyes only” confidentiality regime

The issue whether certain licence agreements should only be disclosed on an “external eyes only” basis, i.e. only to external solicitors, counsel and independent experts, was recently decided in the UK by Carr J in the TQ Delta v Zyxel case. The case involved inter alia the determination of reasonable and non-discriminatory licence terms relating to two standard essential patents owned by TQ Delta. TQ Delta intended to disclose certain licence agreements on an “external eyes only” basis; while Zyxel also wanted two of its employees to have access to those documents.

After a review of the past UK cases, Carr J held that parties must be allowed to see documents which are relevant to the case, and if such documents are considered confidential, their use and disclosure should be governed by appropriate confidentiality club agreements as is often the case. However, an “external eyes only” tier that enables a blanket exclusion of a party to review key documents is incompatible with the principles of natural justice and European Convention of Human Rights. Therefore, it should only be used in certain specific cases, for example at an interim stage of a case where documents are likely to be of limited relevance and their disclosure could be damaging. He also accepted that the tier can also be used in respect of relevant documents, but only in exceptional circumstances and at an interim stage of the case. In such cases, a party who wishes to limit disclosure of relevant documents to “external eyes only” must satisfy the court that the limitation is justified.

After evaluating the evidence and parties’ arguments, Carr J found in favour of Zyxel and held that the licence agreements are highly relevant to the case and that TQ Delta had failed to prove that their disclosure should be limited to “external eyes only”.

A copy of the decision can be read here.

Headnote: Rajesh Sagar, Managing Associate, Marks & Clerk Solicitors LLP