Case C-644/16, Synthon – resisting its impounded documents being inspected by a rival

How can you prove your case when the other party has in its possession the evidence you need? Perhaps you will need to instigate a search-and-seize raid on the other party? In this case, a Japanese pharmaceutical firm did just that. It organised Dutch court bailiffs to raid a Dutch firm suspected of making patent-infringing drugs. However, once the materials had been seized, the Japanese firm then asked the Dutch court for access to inspect them. This stumped the Dutch judges. What rules and standards should they apply to determine that request in light of the ‘evidence’ rule in Article 6 of the EU’s ‘enforcement’ Directive 2004/48?

Background
One problem a drug designer can face is the need to delay and control the release of a drug into the human body. One solution to this problem has been to use a hydrogel.

In this case, the Japanese pharmaceutical firm ‘Astellas’ invented just such a ‘sustained-release hydrogel preparation’. And to see off its commercial rivals, the Japanese firm protected its invention with a ‘European Patent’ which was effective in both Spain and Holland.

A few months before its European Patent was due to expire, the Japanese firm got hold of some Tamsulosina tablets that were being freely traded on the Spanish market. What annoyed the Japanese firm was that these Tamsulosina tablets were ‘delayed-effect’. This made the Japanese firm suspect that its hydrogel patent was being infringed. As a result, the firm went to the Spanish courts. The firm obtained an injunction. This stopped the Spanish-seller of the Tamsulosina tablets, Synthon Hispania, and its Dutch parent company ‘Synthon’, from any further infringement.

The Japanese firm then focused its attention on the Dutch parent company, Synthon. Suspecting the Dutch of either infringing the patent in Holland or otherwise being engaged in unfair competition, the Japanese firm went to the Dutch courts. To start with, it organised Dutch court-appointed bailiffs to raid Synthon and seize relevant evidence. The bailiffs duly obliged and seized 4 DVDs full of ‘possibly relevant’ digital files found on the Dutch company’s computer system, and they also managed to retrieve various other files that had been stored in Synthon’s company admin system.

Materials seized, the Japanese firm then returned to the Dutch court. This time, they sought an order that would grant them access to the impounded evidence – after all, an inspection would help them to prove their patent infringement case and identify who in the Dutch firm knew what and when.

However, their inspection request to the court met with fierce opposition from the Dutch firm. In essence, the Dutch believed that the Japanese had absolutely no legal right to inspect the impounded materials.

The Dutch firm advanced two alternative reasons to underpin their belief. Primarily, they thought that the European Patent should not, as a matter of law, have been granted in the first place. Without a legally valid patent, there could be no case of infringement. Alternatively, if they were wrong and the patent was indeed valid, then they believed that they were still doing nothing wrong. This was because they believed that their Dutch tablets did not fall within the protected scope of the Japanese firm’s patent. Without a product falling within the patent, there could be no patent infringement. Either way, there was no case to answer. Consequently, the Dutch firm asserted that there could be neither a legal basis to the Japanese request to inspect the impounded materials, nor a legal basis for the Dutch judge to permit such an inspection.

The parties’ arguments were heard by an IP-specialist judge, who had been parachuted in to the District Court of Oost-Nederland on the German border. The IP judge found refuge in the law of Dutch procedure. That is to say, the judge noted that the inspection request had been in the context of only interim proceedings (a kort geding) – and that court procedure was really only designed to give an initial indication, or a judicial guestimate, as to the likely outcome of a case if there would be a full trial at some point in the future.

With that caveat in mind, the interim judgment went like this. The Japanese company had been largely successful. However, at this stage the technical experts could not agree on whether the Spanish tablets did actually infringe the scope of the patent. Consequently, there was doubt as to whether, at a full trial, the Japanese firm would have proved its infringement case.

That said, the Dutch judge thought that there was still a reasonable suspicion of an infringement. In respect of the Japanese firm’s request to access the impounded materials, the firm’s aim was to determine who knew what, when, and who was involved with the drugs being made. Since that did not concern whether the tablets technically infringed the patent, the Japanese firm could inspect the impounded documents. This was because the evidential burden governing such an access request to prove a threatened infringement was a lower standard of likelihood than that associated with obtaining an interim injunction to stop patent infringement in the context these interim kort geding proceedings.

Alarmed at the prospect of a rival firm inspecting the impounded documents, a pile which would contain sensitive commercial data, the Dutch firm went to the Court of Appeal in Arnhem.

At the Arnhem Court of Appeal
Two years later, the Court of Appeal in Arnhem decided that it did not know what rules and standards were applicable to deciding such an access request, particularly in light of the conflicting case law of the Dutch courts, and the latest Dutch rules which implemented the EU’s ‘enforcement’ Directive 2004/48 (OJ [2004] L157/45).

For whereas the wording of Article 6 of the Directive on ‘evidence’ read:

1. Member States shall ensure that, on application by a party which has presented reasonably available evidence sufficient to support its claims, and has, in substantiating those claims, specified evidence which lies in the control of the opposing party, the competent judicial authorities may order that such evidence be presented by the opposing party, subject to the protection of confidential information. For the purposes of this paragraph, Member States may provide that a reasonable sample of a substantial number of copies of a work or any other protected object be considered by the competent judicial authorities to constitute reasonable evidence.

2. Under the same conditions, in the case of an infringement committed on a commercial scale Member States shall take such measures as are necessary to enable the competent judicial authorities to order, where appropriate, on application by a party, the communication of banking, financial or commercial documents under the control of the opposing party, subject to the protection of confidential information.

there was uncertainty surrounding the meaning of the phrase, ‘reasonably available evidence sufficient to support its claims’.

As a result, the appellate court built a raft of questions which it then floated off in the direction of the Dutch Supreme Court, the Hoge Raad.

At the Dutch Supreme Court
The parties explained their positions to the judges at the Dutch Supreme Court, and an IP-specialist Advocate General.

After reflecting on those submissions, the Advocate General produced his Opinion. In essence, it went like this. The Japanese firm had contended that it should have access to inspect the impounded materials. The arguments which it had used to support its contention had the whiff of the permissive, easy-to-satisfy rules associated French law’s saisie contrefaçon. He was against that. From an economic point of view, it would be anti-competitive for rivals to have easy access to a firm’s secrets. From a legal point of view, he doubted whether French law was even compatible with the EU’s ‘enforcement’ Directive.

Still, the dispute concerned the EU’s enforcement Directive so he would look at the approaches being taken in England and Germany. Although English law seemed rather difficult to compare, it was hallmarked by proportionality. German law was easier to compare because it was the closest to Dutch law but it too bore the hallmark of proportionality. Under German law, a request to access impounded materials was decided first on the basis of an independent expert who was sworn to secrecy, accompanied by lawyers who were sworn to secrecy (even against their clients). The independent expert’s report was then prepared for the judge, and in light of what the parties had to say at a subsequent hearing, an order would be granted – an order which turned on the particular circumstances of case, an order that was characterised by proportionality. He thought that a further aspect of German law was also to be welcomed. Namely, when a party sought an access order to inspect impounded documents that could contain confidential business materials, then German law seemed to be even more cautious, particularly if patent infringement had not yet been proved.

Therefore, he proposed that the Dutch Supreme Court decide the case in this way. When a court is faced with an access request to impounded non-technical information, that court should take into account not only who is making that request (be they a right holder, or an infringer), but also why they were making that request (were they, for example, after the company involved in the alleged infringement, or were they also seeking to identify third parties who might also have been involved).

By way of conclusion, he thought that the Dutch Supreme Court could decide this case without the involvement of the CJEU – as it had done the just year before in a case of IP plant law, a case in which he too had been the Advocate General, and the Dutch Supreme Court had followed him then. After all, this case was about Dutch law, the Dutch interim procedure of a kort geding, and the Dutch law of evidence. Furthermore, the EU’s ‘enforcement’ Directive intended only minimum harmonisation.

The judges at the Dutch Supreme Court did not agree with the Advocate General. The judges decided to make a preliminary reference. The judges observed that the CJEU’s existing case law did not touch upon the present situation in which a party was resisting an order to access and inspect impounded documents by asserting that no IP right was being infringed. Thus, a question would need to be asked of the CJEU as to the correct interpretation of Article 6 of the Directive.

In that context, the Dutch judges observed that it might be appropriate and indeed in keeping with the ‘enforcement’ goal of the Directive for the resisting party to prove the likelihood of its non-infringement position, and to do so to a higher degree of likelihood than the standard applicable to a claimant who was claiming that their IP right was being infringed. However, the judges also appreciated that it would be in keeping with another of the Directive’s aims, the need for a fair trial, for that standard not be set too high.

Either way, the Dutch judges alerted the CJEU to the fact that patent law arguments about novelty and inventive step could require such complicated investigations as to not always be suitable for a court procedure dedicated to determining whether to grant access to impounded materials.

Questions Referred
The Dutch Supreme Court decided to make a preliminary reference, proposed a couple of questions and then sought counsels’ response. As a result, the Dutch Supreme Court added a further question (2c) on 9 December. My unofficial translation of the questions asked reads:

1. Is Article 6 of the EU’s ‘enforcement’ Directive to be interpreted as meaning that the applicable yardstick for granting a request to access impounded materials [een exhibitievordering] depends on the person against whom the order is sought, namely, an infringer, or an alleged infringer, or a third party?

b. If the answer to that question is in the affirmative, then how do those yardsticks differ?

2. If a party opposing such a request to access impounded materials raises a defence involving the non-existence of the intellectual property right underpinning that request (either because the right is void or no longer exists), then is the determination of whether that defence is well-founded to use the same yardstick as that which is used to determine the likelihood of the claimed infringement (assuming that that intellectual property right exists)?

b. If the answer to that question is in the negative, then how do those yardsticks differ?

c. When answering Questions 2(a) and (b), should a distinction be made according to whether the intellectual property right concerned arises either after having had its validity tested (as with a European Patent) or from the operation of the law (as with a copyright)?

Comment
Although the Dutch Supreme Court’s questions relate to inspecting impounded documents, if the CJEU wants to harmonise the area, then it might be tempted to look at harmonising how to impound evidence and documents in the first place. For this reason, my comment is going to look in more detail at the Dutch Advocate General’s description of English law because it seems a little odd.

In essence, he looked at how English lawyers get evidence from the other party. He notes that the parties do this using ‘disclosure’. He says that the Dutch do not have this. He adds that the disclosure of materials which are relevant to the litigation is left to the initiative of the parties (para 4.20 of his Opinion). To my mind, he imputes a certain voluntary character to disclosure. That may not be correct. Disclosure is done under the auspices of a court, and if parties and their lawyers get disclosure wrong, then there can be sanctions. Therefore, disclosure is not really that voluntary.

The Dutch Supreme Court’s Advocate General then looked at Court Orders in English law. He flags up Freezing Orders (para 4.20). I am not sure why. They normally concern either physical assets or bank accounts. They are designed to avoid a scenario in which a claimant wins his case but then finds the loser has no way of paying up. Perhaps the Dutch Advocate General included Freezing Orders in his comparative study because of the scope of the Dutch conservatoir bewijsbeslag, which the Dutch bailiffs used to impound Synthon’s materials. Perhaps Dutch lawyers can ask for a conservatoir bewijsbeslag in situations where an English lawyer would normally apply for a Freezing Order.

The Dutch Advocate General then discusses another Court Order, the Search Order. His description is again a little odd. He explains that in England the applicant will need to have an extremely strong prima facie case of infringement (para 4.20). That is true. But then in an almost throw-away voice, he says ‘as here, that is not going to be the greatest hurdle in practice’ (my translation). He provides absolutely no evidence for that glib ‘similarity’ between the wording and operation of English law, with the wording and operation of Dutch law.

Is there really such a high degree of similarity between English and Dutch law? It is certainly not obviously apparent from what he writes in his Opinion. He fails to mention some of the other major safeguards which are built in to the English Search Order system, safeguards which make it hard to persuade a court to grant a Search Order.

For example, a person wanting a Search Order is under a duty of full and frank disclosure. This means the applicant must supply the English court with all the material facts, even those unfavourable to the applicant. The applicant will also have to tell the English court in advance the defences which could be raised by a defendant wanting to oppose that application, and they will need to deal with them to the judge’s satisfaction. It is not clear whether an equivalent duty is on a Dutch applicant wanting to use a conservatoir bewijsbeslag. If not, then this is one difference that will make it easier to impound materials in Holland.

The Dutch Advocate General also omits to mention that if there is a failure to comply with full and frank disclosure, and a Search Order is then issued; there will then be a real risk that the defendant will ask the court to rescind the Order and also award it damages. Unfortunately, the Dutch Advocate General never explains whether Dutch law puts the same duty on a Dutch applicant for a conservatoir bewijsbeslag. If not, then this is a second difference that will make it easier to impound materials in Holland.

Equally, the Dutch Advocate General omits to say that to get a Search Order in English law, the applicant may need to give undertakings to pay damages to innocent third parties – with those undertakings being backed up by the applicant making up-front payments of money either to his solicitor or into court. If there is no equivalence in Dutch law, then this is a third difference that will make it easier to impound materials in Holland.

Nor am I convinced by the Dutch Advocate General’s discussion of English law’s independent ‘supervising solicitor’. Besides repeatedly misspelling the title of this person (‘solicitor’ has one ‘l’), the Dutch Advocate General omits to say that the supervising solicitor can stop the search taking place for a couple of hours while the defendant obtains legal advice (during which time the supervising solicitor can also stop the defendant or his employees from destroying evidence). If there is no equivalent way of stopping the Dutch bailiffs, then this is a fourth difference that will make it easier to impound materials in Holland.

Curiously, the Dutch Advocate General then turns his attention to another feature of English law, Norwich Pharmacal orders (para 4.22 of his Opinion). He says these relate to the release of names and addresses on impounded documents and that the English judge will do a balancing act between the requested information really helping to prove the infringement claim, as against the harm any release of that information would do to the alleged infringer. However, he does not explain that this Order is normally directed at a non-party to the litigation. Requesting a Norwich Pharmacal order is normally done to identify the proper defendants. Such an order would not appear relevant in this case. Astellas knew who the other defendant was because Synthon’s tablet information clearly indicated that Synthon had manufactured the tablets. Thus, it is not clear why the Dutch Advocate General included in his legal comparison a discussion about Norwich Pharmacal orders, unless of course a Dutch conservatoir bewijsbeslag performs this function too.

If a Dutch conservatoir bewijsbeslag does indeed also perform the function of a Norwich Pharmacal order, then his discussion of that English law also seems a bit out of date. If, as here, the names and addresses of Synthon’s clients were on computer files, then that information would be personal data. He should therefore have considered what the link was between Norwich Pharmacal order law, EU Charter rights and the CJEU’s relatively recent Enforcement Directive judgments in Case C-275/06, Promusicae, and Case C-461/10, Bonnier Audio – those judgments also being in the background to the CJEU’s more recent judgment in Case C-580/13, Coty Germany. In other words, the balancing exercise in a Norwich Pharmacal Order against a non-party to the litigation might now be a little more complicated than the Dutch Advocate General suggested to the Dutch Supreme Court.

There is a further aspect to the Dutch Advocate General’s description of English law which confused me. He says that in English law, material does not have to be given to the claimant laying claim to the evidence, if the validity of the claimed IP right (or its infringement) is not already sufficiently likely. In that context, he cites (and, yes, misspells) the English case of Lock International Plc v. Be[s]wick. The case was about ex-employees who had taken a confidential list of their former-employer’s customers. The Dutch Advocate General cites this passage from Lock International Plc:

“… In many cases it will therefore be sufficient to make an order for delivery up of the documents to the claimant’s sol[…]icitor for copying and the return to the defendant, or an order that the defendant do preserve documents pending further order.”

To this, the Advocate General immediately adds: ‘That ‘pending further order’ seems to be an appropriate approach for the present case before us, where the judge considers that it is not yet sufficiently likely that there is an infringement’ (para 4.24 of his Opinion, my translation).

I am not sure that that is a fair representation of what the English judge was saying. The Dutch Advocate General rips the English judge’s three words completely out of their context – that context being that a search order had already been granted, the ex-employees’ homes had already been raided, and pretty much every single document relating to the creation of a new company had been seized. Against that backdrop, the people went to court to ask for the Anton Piller Order to be revoked. To my idea, the judge in Lock International Plc indicated that even if there was overwhelming evidence of wrongdoing in his commercial relationships, then an applicant would still not get a Search Order, especially if the defendant’s home was to be searched. Rather, the judge explained that a less intrusive court order would suffice, such as one for delivery up, or one for the preservation of documents. Irrespective, the parties would soon be back in court to discuss any order.

Thus, to my mind the main point in Lock International Plc is not about the likely validity of the claimed IP right, or its infringement; it is really about how difficult it will be to convince a judge of the necessity of issuing a Search Order, and that necessity relates not to infringement but rather the risk of documents being destroyed without that Search Order. And that as with any Court Order, the parties will be back in court again to discuss it and perhaps change it. Again, I wonder if there is any equivalent protection in Dutch law, if not then that is yet another difference that will make it easier to impound materials in Holland.

Taken in the round then, there may be half a dozen differences between English and Dutch laws about seizing documents and evidence. Perhaps, the CJEU could ask the referring Dutch court to explain what the conditions are for: (a) obtaining a conservatoir bewijsbeslag from a Dutch court, and what scenarios it operates in; and (b) how a party obtains an exhibitievordering (an access order to inspect impounded documents). Such information might help concerned EU citizens, their Member States, and their EU institutions to make sensible interventions in this preliminary reference which has the potential to affect national procedural laws in areas way beyond IP law.

Even if the scope of this preliminary reference is limited to IP law, then the Dutch Supreme Court’s questions to the CJEU are not simple. The complexity arises from the procedural reality that some national courts are competent to look at invalidity but other courts in the same national system are competent to deal with infringement; see for example, the split situation in the Austrian trade mark law preliminary reference which is currently in the CJEU’s ‘In-Tray’ and docketed as Case C-425/16, Raimund.

Perhaps the CJEU’s answers to the Dutch Supreme Court’s questions will go back to basic principles? In that context, it might be useful to remind readers that the issue of rights of defence, and a fair trial, and access to confidential and or privileged documents is at stake in a number of other non-IP law preliminary references currently pending before the CJEU.

For example, there is the case of a Dutch lawyer who wants to establish his innocence but to do so requires the Luxembourg financial authority and a bank to release confidential documents to him; see further, Case C-358/16, UBS – stopping a lawyer accessing innocence-establishing documents.

The issue of information orders, information exchange, and a fair trial, is at stake in another preliminary reference emanating from Luxembourg Cour Administrative; see further, Case C-682/15, Berlioz Investment Fund – tax information exchanges not fishing expeditions.

And when it comes to the issue of third parties and their rights to privacy, it should be recalled that there is already a case pending before the CJEU on the limitation of the privacy right by the ‘rights of others’ in Article 8(2) ECHR; see further, Case C-13/16, Rīgas satiksme – our police data request is necessary for our legitimate interest.

[The above post was based on material that first appeared on EU Law Radar on 30 November 2016 as an update to the UBS case and was subsequently changed on 13 December in light of the Dutch Supreme Court’s additional question to the CJEU].

Readers of EU Law Radar who are interested in Astellas Pharma are referred to another preliminary reference pending before the CJEU, which originates from the Finnish Supreme Court; see further, Case C-557/16, Astellas Pharma – measuring the data exclusivity period on a marketing authorisation.

Update – 10 January 2017
Parallel to private law and the right to access documents that can help people protect their legal position, there is a public law access-to-documents preliminary reference from the Italian Council of State in respect of evidence held by Italy’s Central Bank; see further, Case C-594/16, Buccioni – Dear Central Bank, Documents please. Regards, Mr E. Swindled.