IPIC Intervenes in Appeal Clarifying the Law of Protective Orders

Summary

The Federal Court of Appeal has clarified the test for determining the availability of protective orders in an appeal of the Order of Justice Locke, as he then was, (the “Motion Judge”) in which a protective order jointly sought by the parties was refused on the basis that a protective order was not necessary, and ought not to be granted, where a protective agreement between litigants was a reasonably available alternative means of protecting the parties’ confidential information.  

One of the parties, Canadian National Railway Company (“CN”), appealed the Order. The Intellectual Property Institute of Canada (“IPIC”), represented in the appeal by Goodmans LLP, was granted leave to intervene in order to provide the Court of Appeal with the position of IPIC’s members – being strong support for the continued availability of protective orders in Federal Court litigation. 

In Reasons for Judgment dated February 17, 2020, the Federal Court of Appeal agreed with CN and IPIC and set aside the Order of the Motion Judge, observing that “protective orders undoubtedly remain pertinent and useful for intellectual property litigants and there is no justification, legal or otherwise, for stifling [the] longstanding practice” of granting protective orders sought on consent.

The Motion Below

The facts relevant to the motion were not unique.  In the context of a patent infringement dispute, CN and BNSF Railway Corporation jointly sought a protective order (based on an order routinely granted by the Federal Court) to protect their interests when disclosing confidential information during the discovery process.

Although the normal practice in the profession had been to seek consent protective orders without a formal motion from the Case Management Judge, in this case, the parties were invited by Madam Prothonotary Tabib to formally move before a Federal Court judge.  

By written Reasons for Order dated March 7, 2019, the Motion Judge dismissed the parties’ joint motion.  Justice Locke concluded that the test for confidentiality orders, as set out by the Supreme Court of Canada in Sierra Club v Canada (Minister of Finance), 2002 SCC 41 (“Sierra Club”), which incorporates a necessity requirement, also applied to protective orders. The Motion Judge held that a protective order was not necessary because “reasonably alternative measures” were available to the parties in the form of the implied undertaking rule, which could be supplemented by a “protective agreement” between the parties.

The Federal Court of Appeal Clarifies and Reinstates the Law

In allowing CN’s appeal, the Federal Court of Appeal held that the test outlined in AB Hassle v Canada (Minister of National Health and Welfare) (1998), 161 FTR 15, 83 CPR (3d) 428 at paras 15 and 20-30, affirmed in AB Hassle v Canada (Minister of National Health and Welfare), [2000] 3 FC 360, 5 CPR (4th) 149 (Fed CA), remains the test regarding the availability of protective orders. The Federal Court of Appeal quoted from IPIC’s memorandum of fact and law to summarize the applicable test:

Before issuing a protective order relating to information to be produced, the Court must be satisfied that “the moving party believes that its proprietary, commercial and scientific interests would be seriously harmed by producing information upon which those interests are based.”  In the event a party challenges a confidential designation made by the other party, in determining whether information is confidential, the Court must be satisfied that it “has been treated by the party at all relevant times as confidential,” and that “on a balance of probabilities, [the disclosing party’s] proprietary, commercial and scientific interests could reasonably be harmed by the disclosure of information” (the “AB Hassle test”).

In contrast, the Sierra Club test, which is applicable to confidentiality orders (as opposed to protective orders) requires that:

A confidentiality order under Rule 151 [of the Federal Courts Rules] should only be granted when:

(a) such an order is necessary in order to prevent a serious risk to an important interest, including a commercial interest, in the context of litigation because reasonably alternative measures will not prevent the risk; and

(b) the salutary effects of the confidentiality order, including the effects on the right of civil litigants to a fair trial, outweigh its deleterious effects, including the effects on the right to free expression, which in this context includes the public interest in open and accessible court proceedings.

The Federal Court of Appeal observed that while the Supreme Court in Sierra Club referenced the AB Hassle test in the context of assessing when an important commercial interest is engaged, it did not extend the AB Hassle test to include a consideration of necessity, alternative measures, or the scope of the order to ensure that it is not overly broad.

The Federal Court of Appeal emphasized that different interests are invoked in seeking protective orders and confidentiality orders. Specifically, confidentiality orders circumvent the open court principle by restricting access to materials filed with the court, while protective orders apply to the discovery process and therefore do not engage the open court principle.  

Accordingly, the Federal Court of Appeal found that the Motion Judge had erred at law by conflating the AB Hassle test and the Sierra Club test, and that there is “no justification” for applying the more onerous Sierra Club test to requests for protective orders.

Hybrid Orders

As the order sought by CN and BNSF was, in fact, a “hybrid” order (i.e., an order that governs both confidential information exchanged between parties and confidential information filed with the Court), the Federal Court of Appeal noted that the test for granting a hybrid order remains the same as the test for granting a protective order.  However, the Court stated that documents subject to a hybrid order that a party wishes to have treated as confidential by the Court must bring a motion pursuant to Rule 151 of the Federal Courts Rules shortly after filing such documents.  It is at this time, when the Court is being asked to seal documents, that the Sierra Club test is engaged.

Conclusion

The Federal Court of Appeal allowed the appeal, and stated that there is “no significant and compelling changes to the law that justify a refusal to grant a protective order on consent (or not) if (i) the AB Hassle test is met, and (ii) the protective order submitted to the Federal Court is in accordance with the protective order template jointly developed over the years between the Intellectual Property Bar and the Federal Court”.