The quiet power of confidentiality clubs in SEP litigation

In standard essential patent (SEP) disputes, especially those involving FRAND (Fair, Reasonable, and Non-Discriminatory) terms, confidentiality clubs play a vital role. They protect sensitive commercial data, such as licensing agreements, royalty rates, and negotiation records, while allowing for full and fair disclosure in court. By restricting access to authorized counsels and experts, confidentiality clubs ensure that proprietary information is not misused or exposed to competitors. This balance between transparency and protection enables the effective adjudication of FRAND issues and aligns with global best practices followed by courts in India.

Who can be a member of the confidentiality club?

This issue has come up in a series of three suits instituted by Nokia against 1) Asustek Computer Inc. & Anr. CS(COMM) 643/2025, 2) Acer, Inc. & Anr. CS(COMM) 644/2025, and 3) Hisense Group Holdings Co. Ltd. & Anr. CS(COMM) 645/2025. The suits initiated by Nokia at the Delhi High Court concern the alleged infringement of the following patents:

• IN 424507
• IN 338105

Both patents appear to be essential for implementing advanced video compression techniques in devices such as smartphones, computers, and smart TVs. They are considered SEPs because they are necessary for compliance with the HEVC video coding standard, which is widely used in the industry.

Key issues before the court

Constitution of the confidentiality club:

• Whether the confidentiality club (for handling confidential licensing documents) should include only external advocates/consultants/experts or also the defendants’ in-house representatives.
• If in-house representatives are included, whether their participation should be restricted to those who are members of similar clubs in corresponding foreign proceedings (e.g., before the Unified Patent Court, Munich).

Limited-licensing restriction:

• Whether in-house representatives of the defendants, if included in the confidentiality club, should be subject to a “limited-licensing restriction,” which would bar them from participating in licensing negotiations with third parties whose agreements are disclosed, for a period of two years, unless the third party consents.

Redaction of confidential documents:

• Whether Nokia can file redacted versions of confidential documents, and under what conditions.
• Whether Nokia must identify in advance which portions are redacted and the basis for such redactions.
• Whether unredacted versions should be made available for inspection by the confidentiality club members, and if so, to whom (external counsel only, or also in-house representatives).

Disclosure of comparable licenses:

• Whether Nokia must disclose all comparable license agreements (not just a selection) to the confidentiality club, to enable the defendants to assess whether the licensing terms offered are FRAND.

Court’s ruling

Confidentiality club composition

The court ruled that the confidentiality club will include the defendants’ legal counsel, consultants, experts, and in-house representatives. The in-house representatives must mirror those who are members of the confidentiality club in the corresponding foreign proceedings (such as before the Unified Patent Court in Munich), to prevent the unnecessary dissemination of confidential information.

Limited licensing restriction

The court rejected Nokia’s request to impose a two-year “limited-licensing restriction” on the defendants’ in-house representatives (i.e., barring them from participating in licensing negotiations with third parties whose agreements are disclosed). Instead, the court directed that in-house representatives must make full and prior disclosure of their access to the license agreement to the relevant third-party licensee before any negotiations, and the plaintiff may also notify the third-party licensee of such disclosure.

Redaction of confidential documents

The court allowed Nokia to redact portions of confidential documents, provided that these details were agreed upon to remain confidential with third-party licensees and were not relevant to the determination of the FRAND rate. The court directed that:

• Unredacted versions must be filed in a sealed cover and made available for inspection by the defendants’ external counsel (not in-house representatives).
• Defendants may approach the court for disclosure of redacted material on a document-by-document basis.

Disclosure of comparable licenses

The court directed Nokia to disclose all comparable license agreements (not just a selection) to the confidentiality club, to enable the defendants to assess whether the licensing terms are FRAND.

Our comment

The court balanced the interests of both parties by allowing in-house representatives in the confidentiality club (with safeguards), permitting limited redaction, and requiring full disclosure of comparable licenses. The court did not accept Nokia’s request for a blanket restriction on the defendants’ in-house representatives. In effect, the ruling provided a mechanism to protect confidential information while ensuring fairness in the litigation process.   

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