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Cite as: [2018] EWHC 2144 (Ch)

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Neutral Citation Number: [2018] EWHC 2144 (Ch)
Case No: BL-2018-001502


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Computer-Aided Transcript of the Stenograph Notes of Marten Walsh Cherer Ltd.,
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MR. NEIL KITCHENER QC and MR. MATTHEW COOK (instructed by CMS Cameron McKenna Nabarro Olswang) for the Applicant/Claimant
MR. ANDREW GREEN QC and MR. MARK VINALL (instructed by Potter Clarkson) for the Respondent/Defendant



Crown Copyright ©

    (Transcript prepared without access to documents)



  1. This is an application by the claimant ("S"), for an interim injunction to restrain disclosure of certain information, the disclosure of which S claims would be in breach of a non-disclosure agreement (the "NDA").
  2. Exceptionally, I decided to hear this application and gave judgment in private, pursuant to CPR r.39.2, because public disclosure of the relevant information at a hearing which identified the parties, would have rendered the application pointless. However, the principle of open justice requires that judgments should be public; see Practice Guidance: Interim Non-Disclosure Orders [2012] 1 WLR 1003 SEN CTS; White Book Volume 1 B13-001. Having anonymised the parties, no further derogation from this principle is justified.
  3. S and the defendant, ("A"), are pharmaceutical companies who are involved in a multi-jurisdictional patent dispute. The details of that dispute are not material for present purposes. In an attempt to resolve their dispute, the parties agreed that without prejudice discussions should take place. To some extent at least, the existence of those without prejudice discussions, as well as their content, is protected by the NDA from disclosure. The NDA is governed by English law and subject to the exclusive jurisdiction of the English courts.
  4. A wishes to bring a claim for a declaration of non-infringement in its home state of Massachusetts. I was told that in correspondence S has indicated that it is likely to sue A for patent infringement in the United States at the point when its regulatory approval process is sufficiently advanced to enable such a claim to be brought. Therefore, entirely understandably in my view, A wishes to clear the way if it can, in order to show that it does not infringe.
  5. In order to found jurisdiction, A wishes to use the fact that without prejudice discussions took place in its home state. Apparently it is the position under United States law, at least in certain states, that the fact that without prejudice discussions took take place and the parties attended for that purpose, can found jurisdiction.
    S says that that is precisely what is prohibited by the NDA.
  6. Nothing in this judgment is intended to interfere with the process of the Massachusetts court. I am solely concerned with whether disclosure of certain information is prohibited pursuant to the NDA, which is a matter of English law.
  7. A change in A's case

  8. Originally, A claimed that it was obliged to provide information about the existence of the without prejudice discussions to the Massachusetts court in order to correct a misleading impression that had been created by S's US attorneys. A's US lawyers claimed that they had a legal obligation under the Massachusetts rules of professional conduct to correct an allegedly misleading statement that the only remotely relevant activity with some relation to Massachusetts, namely two letters, was insufficient to found jurisdiction.
  9. Whilst this argument may re-surface at trial, I think it is important to say at this stage, since the matter has been raised before me, that I do not consider that there is any case that S's lawyers sought to mislead the Massachusetts court. In my judgment it is clear that the Memorandum (which is the relevant pleading), when read as a whole, is simply addressing those matters relied on by A in its complaint as giving rise to jurisdiction. It identifies the only two matters relied on by A which potentially relate to Massachusetts, and states those facts are insufficient to vest jurisdiction in the Massachusetts court. Furthermore, the Massachusetts rules of professional conduct do not require lawyers to correct statements made by the opposite party. Therefore, I do not consider that the explanation offered in evidence on behalf of A, as to why A had sought to adduce this evidence before the Massachusetts court, stands up to scrutiny.
  10. However, shortly before this hearing, A changed the basis upon which this application was sought to be resisted. By a letter dated 15th July 2018, written by Potter Clarkson on behalf of A, it was said that the need to correct the record in the Massachusetts proceedings was no longer pursued. The explanation given, which I do not accept, was that S's lawyer in the United States had suggested that a correction would be made by amendment to the Memorandum. The fact of the matter is that the original basis for resisting this application is no longer pursued by A. Instead, a new point was taken. It was said by Potter Clarkson that:
  11. "It does not follow that your client is then entitled to an interim injunction. The English legal team has now given detailed further consideration to the material and temporal scope of the NDA. It is clear to us that, upon its true construction, the NDA only covers information provided after the effective date of the NDA, 12th September 2017. It does not cover information provided before the effective date, nor does it cover the existence of discussions or negotiations taking place before that date.
    Our client is therefore entitled to rely on the fact of the meeting in August 2017 (and e-mails prior to the Effective Date referring to the existence of that meeting) in support of its claim to personal jurisdiction in the Massachusetts proceedings."
  12. Mr. Kitchener QC, who appeared on behalf of S, submitted, with justification, that if this argument were right, it could have been raised at any time. It was always, potentially, an answer to this application. There is no doubt that, at least until around the date of this letter A itself believed that the August 2017 meeting and the existence of the August 2017 discussions were covered by the NDA. Indeed, e-mails between the parties made that clear.
  13. However, as Mr. Green QC who appeared on behalf of A pointed out, this is a question of construction of the NDA. Either it is right or wrong. Either the NDA prohibits disclosure of the existence of settlement discussions, before and after its date, or it does not.
  14. Legal principles

  15. For the purposes of deciding this question, I need first to set out the relevant test. The test for an interim injunction under American Cyanamid is very well known. Broadly, the issue are: (i) whether there is a serious issue to be tried; (ii) whether the claimant and defendant will suffer irreparable or unquantifiable harm; (iii) consideration of the balance of convenience and (iv) the status quo.
  16. However, there are two further issues to consider in the context of this application. First, in respect of negative contractual covenants, it is well established that where there is a clear breach, the court should normally grant an injunction without needing to consider whether damages are an adequate remedy or the balance of convenience. This is because all the court is doing by way of injunction is to give the sanction of the process of the court to what the parties have already agreed; see for example Dyson Technology Ltd v Pellerey [2016] EWCA Civ 87 at [69]-[74]. Secondly, in the context of an interim injunction to restrain publication of confidential information, Section 12 of the Human Rights Act provides that:
  17. "12 Freedom of expression.
    "(1) This section applies if a court is considering whether to grant any relief which, if granted, might affect the exercise of the Convention right to freedom of expression.
    "(3) No such relief is to be granted so as to restrain publication before trial unless the court is satisfied that the applicant is likely to establish that publication should not be allowed.
    "(4) The court must have particular regard to the importance of the Convention right to freedom of expression and, where the proceedings relate to material which the respondent claims, or which appears to the court, to be journalistic, literary or artistic material (or to conduct connected with such material), to—
    "(a) the extent to which—
    "(i) the material has, or is about to, become available to the public; or
    "(ii) it is, or would be, in the public interest for the material to be published;
    "(b) any relevant privacy code.
    "(5) In this section—
    "'court' includes a tribunal; and
    "'relief' includes any remedy or order (other than in criminal proceedings)."
  18. Section 12 was considered by the House of Lords in Cream Holdings Ltd v Banerjee [2004] UKHL 44, in particular at [22]:
  19. "In my view section 12(3) calls for a similar approach. Section 12(3) makes the likelihood of success at the trial an essential element in the court's consideration of whether to make an interim order. But in order to achieve the necessary flexibility the degree of likelihood of success at the trial needed to satisfy section 12(3) must depend on the circumstances. There can be no single, rigid standard governing all applications for interim restraint orders. Rather, on its proper construction the effect of section 12(3) is that the court is not to make an interim restraint order unless satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case. As to what degree of likelihood makes the prospects of success 'sufficiently favourable', the general approach should be that courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably ('more likely than not') succeed at the trial. In general, that should be the threshold an applicant must cross before the court embarks on exercising its discretion, duly taking into account the relevant jurisprudence on article 10 and any countervailing Convention rights. But there will be cases where it is necessary for a court to depart from this general approach and a lesser degree of likelihood will suffice as a prerequisite. Circumstances where this may be so include those mentioned above: where the potential adverse consequences of disclosure are particularly grave, or where a short-lived injunction is needed to enable the court to hear and give proper consideration to an application for interim relief pending the trial or any relevant appeal."
  20. I consider that in the light of the Cream judgment, the first question is whether S has satisfied the court that it is more likely than not to succeed at trial. The court can depart from this general approach in appropriate circumstances but I do not think that in the circumstances of the present case I ought to do so.
  21. Terms of the NDA

  22. The material parts of the NDA are as follows:
  23. (i) A Recital which provides:

    "WHEREAS: The parties intend to enter into discussions and negotiations with each other with a view to considering a proposed settlement in relation to certain intellectual property rights. To this end, the communications between the parties shall be considered negotiations and/or offers of compromise and, as such, shall not be admissible as evidence against either party in any litigation proceeding (including arbitration) and shall be subject to Federal Rule of Evidence 408. For this purpose, each of (1) S and (2) A may provide the other with financial and other information (but no technical or other product or services information) related to the Proposed Agreement, which shall be the subject of the confidentiality obligations set out in this Agreement.

    (ii) Certain definitions:

    1.1 In this Agreement, the following words and phrases shall have the following meanings unless the context otherwise requires:
    "Confidential Information" means:
    (A) all information, in whatever form which is provided to the Receiving Party or any of its Authorised Representatives in the course of discussions and/or negotiations, including without limitation information relating to the Proposed Agreement or the evaluation thereof after the date of this Agreement, including (without prejudice to the generality of the foregoing) information held for the time being on paper or in electronic form or communicated orally or in the form of models, materials or demonstrations;
    (B) all copies of any such information in whatever form;
    (C) knowledge of the fact the parties are or were in discussions or negotiations in connection with the Proposed Agreement; and
    (D) all reports, analyses, compilations, forecasts, studies, memoranda or other documents, materials or information prepared by or on behalf of the Receiving Party which contain, derive from or reflect, utilise or are generated from any of the information previously referred to in this definition.
    provided that "Confidential Information" shall not include such information which:
    (1) is, on the date of this Agreement, proved to have been known to the Receiving Party before it was so provided to or lawfully acquired by the Receiving Party or any of its Authorised Representatives;
    (2) has been independently and lawfully acquired by the Receiving Party without (so far as it is aware) the breach by any person of any obligation of confidentiality;
    (3) at the time of supply is in the public domain; or
    (4) subsequently comes into the public domain, other than through breach of the undertakings set out in this letter.
    "Proposed Agreement" means the proposed settlement agreement in relation to a dispute relating to intellectual property rights between the parties which may be entered into by S and A and/or certain other of their Group Companies; and

    (iii) Clause 2.6A:

    2.6 Duration of obligations
    (A) The obligations contained in paragraphs 2.1 to 2.5 inclusive shall save as hereafter provided continue until 5 years from the date of this Agreement, but if and to the extent that any information forming part of the Confidential Information:
    (1) is now in or shall hereafter have entered into the public domain (otherwise than as a consequence of unauthorised disclosure by the Receiving Party or any of its Authorised Representatives); or
    (2) was prior to the date of this Agreement in the lawful possession of, or had been lawfully provided to the Receiving Party by another party (as evidenced by the written records of the Receiving Party); or
    (3) in the reasonable opinion of the Receiving Party is information which is required to be disclosed by the Receiving Party by law or pursuant to any requirement of any governmental, official or regulatory body (including without limitation the London Stock Exchange)
    then, and to that extent only, the obligation not to disclose shall cease to have effect, provided always that in a case within clause 2.6(A)(3) the provisions sub-clauses (B), (C) and (D) of this clause 2.6 shall apply. …

    (iv) Clause 3:

    3. Announcements and non-disclosure of discussions
    Each party agrees with the other that it will not make any announcement to employees, customers or the public concerning, or divulge to any person other than their respective Authorised Representatives, the existence of or content of discussions between it and the other party and their respective advisers in contemplation of the Proposed Agreement, without the prior written consent of the other party, save as may be required in the circumstances referred to in clause 2.6(A)(3) (and subject to the provisions of clauses 2.6(B) to (D) inclusive), including, but without limitation, if required by the Listing Rules or Disclosure Guidance and Transparency Rules of the Financial Conduct Authority or by the AIM Rules for Companies published by the London Stock Exchange or by the London Stock Exchange or the Financial Conduct Authority or pursuant to any enquiry or investigation by any governmental, official or regulatory body.

    (v) Clause 4:

    4. No obligation to negotiate and status of negotiations
    4.1 Each party acknowledges and accepts that the other party is not entering into any obligation to carry on with any discussions or negotiations already begun with it in connection with the Proposed Agreement and that the other party may terminate any such discussions or negotiations at any time in its absolute discretion. Where no discussions or negotiations with a party have begun at the date of this Agreement, the other party does not assume any obligation to enter into them.
    4.2 It is recognised and agreed by each party that any discussions or negotiations undertaken between the parties are to be treated as being 'without prejudice' and that that each party reserves all of its rights during and in any such discussions or negotiations.

    (vi) Clause 5:

    5. Governing law and jurisdiction
    This Agreement (and all matters arising from it, including, without limitation, any dispute relating to the existence, validity or termination of this Agreement or any contractual or non-contractual obligation) shall be governed by and construed in accordance with English law, shall constitute the entire agreement between the parties in respect of its subject matter and shall supersede any earlier agreement between the parties as to the confidentiality of information relating to a Disclosing Party or any part thereof so far as the same shall be inconsistent with the terms of this Agreement. In relation to any legal action or proceedings arising out of or in connection with this Agreement (including any matters arising from it as mentioned above) ("Proceedings") each of the parties irrevocably submits to the exclusive jurisdiction of the English courts and waives any objection to Proceedings in such courts on the grounds of venue or on the ground that Proceedings have been brought in an inappropriate forum.

    Outline submissions of the parties

    A's submission

  24. The case for A is that the NDA does not apply to communications, and in particular to the existence of settlement discussions or negotiations, which occurred prior to its effective date on the 12th September 2017. It argued as follows: First, the recital is entirely forward looking. In particular, the recital refers to the fact that the "parties intend to enter into discussions and negotiations with each other with a view to considering a proposed settlement". That is plainly looking to the future. Furthermore, it records that each of S and A may provide the other with financial information; again, looking to the future. Furthermore, the reference to a "proposed settlement" is to an agreement that might in the future be reached as a result of the discussions and negotiations which are contemplated.
  25. Secondly, referring to the definition of "Confidential Information" in clause 1.1, A claims that the definition of Confidential Information in category (A) is expressly limited to all information in whatever form which is provided to the receiving party. It does not include information which has already been provided.
  26. Thirdly, the definition of "Proposed Agreement" as "proposed settlement agreement in relation to a dispute" is relied upon by A, as referring to an agreement which may be reached as a result of future communications pursuant to the agreement.
  27. Fourthly, A acknowledges that clause 1.1(C) refers to knowledge of the fact that the parties are or were in discussions or negotiations in connection with the Proposed Agreement. A's case is that this means negotiations or discussions which are to take place after the agreement has commenced but which may or may not proceed to fruition. In other words, the reference to the past tense merely reflects the fact that "Confidential Information" is intended to include discussions which ultimately founder.
  28. Fifthly, A submitted that the proviso to clause 1.1(1) excludes information already known to a party at the date of the NDA. That, it is said, applies to the existence of the negotiations in August 2017, which was known to A before the date of the agreement. According to A, such discussions are therefore excluded from the definition of "Confidential Information".
  29. Sixthly, Clause 2.6(A)(2) is relied upon. This is a mirror image of proviso (1) to clause 1.1, in that it also provides, amongst other things, that the obligation excludes any information forming part of the Confidential Information which prior to the date of the agreement was in a party's lawful possession. A submitted that this applies to its knowledge of without prejudice negotiations which preceded the date of the NDA.
  30. S's submissions

  31. First, Mr. Kitchener QC, on behalf of S, drew attention to the purpose of the NDA. He submitted that the parties were seeking to avoid any disclosure of the fact that they were or had been in discussions. He relied on the evidence of S's US lawyer, who, at paragraphs 9-10 of his witness statement, explained that the US courts respect NDAs and prohibits the use of information protected by an NDA in an attempt to prove jurisdiction. He stated at paragraph 10:
  32. "In my experience, NDAs are a common occurrence in these situations precisely because they promote full and frank discussion without the risk that entering into discussions in a particular place exposes one or other parties to the risk of proceedings for declaratory judgment in the courts of that place."
  33. That, both sides say, is a relevant part of the factual background to the making of this agreement.
  34. On S's case, A's interpretation of the NDA does not achieve that key objective. It permits A to rely on the fact of settlement discussions in order to found jurisdiction. It was submitted that, since the parties did not want anyone to know about the fact that they were in discussions, it makes no commercial sense to suppose that the NDA permits precisely that.
  35. Secondly, it would not make commercial sense to suppose that the parties intended to permit limited disclosure of the discussions in August while prohibiting disclosure of the later discussions. That, it is said, would permit the disclosure of a partial story, or permit partial disclosure in a manner that might force the other party to make disclosure of the post-NDA discussions, which are unarguably the subject of the NDA, in order to prevent an incomplete and inaccurate picture being presented.
  36. Thirdly, S relied upon clause 3 of the NDA, which is not limited by the definition of Confidential Information. It was said that A's interpretation was inconsistent with the express terms of clause 3.
  37. Discussion

  38. I agree with A that the recital is forward looking. However, the purpose of the recital is to set out the background to the NDA and why it is being entered into. It does not define the scope of the agreement or the scope of the obligations under it.
  39. Furthermore, the definition of "Proposed Agreement" as "proposed settlement agreement in relation to a dispute" is referring to an agreement which may be reached as a result of future communications pursuant to the agreement. However, the clause goes on to say: "Including without limitation information relating to the Proposed Agreement or the evaluation thereof after the date of this Agreement." The absence of a limitation means that, at least prima facie, the definition of "Confidential Information" is not limited to information disclosed after the date of the agreement.
  40. It is, of course, necessary to consider the commercial purpose of the NDA. It is necessary to ascertain the meaning which the NDA would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time that it was entered into; Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912, per Lord Hoffmann. It appears that, from S's perspective, the NDA was entered into, amongst other reasons, to keep confidential the existence of past and future settlement negotiations, specifically to prevent A from relying on such negotiations in order to establish jurisdiction before the Massachusetts courts. I also bear in mind that S has not had the opportunity to serve evidence about the factual background to the NDA, because until very shortly before the hearing, the interpretation of the NDA was not in dispute.
  41. As against that, Mr. Green pointed out that it is safe to infer that there is no prior non-disclosure agreement which would cover the August negotiations. If there were, it would undoubtedly have been referred to in S's evidence. Therefore, he asked, "why should A have sacrificed its potentially significant advantage of being able to found jurisdiction in its home state by entering into the NDA?". He submitted that had A intended to do this, then this would have been made express in the NDA. It is not. The answer to this question, objectively assessed, may be that A chose to sacrifice that potential advantage because it wished to continue settlement negotiations, and the NDA was a prerequisite in order to enable such negotiations to continue. In my judgment, consideration of the commercial purpose of the NDA, on the information available to me, favours S's interpretation.
  42. In my judgment, clause 3 is of particular importance to this issue. Clause 3 is specifically concerned with a prohibition against the parties from announcing or divulging the existence or content of discussions in contemplation of the Proposed Agreement. Clause 3 is not limited to and is not dependent upon the definition of "Confidential Information". It is independent and freestanding.
  43. On its ordinary meaning, it appears to me that clause 3 includes discussions prior to the NDA. Significantly, clause 3 expressly incorporates clause 2.6(A)(3). This clause, which allows the parties to disclose that which they are required to do by law, is included as an exception to clause 3. However, clauses 2.6(A)(1) and (2) are not. In particular, clause 3 does not allow either of the parties to disclose the fact of discussions which they already knew about prior to entering into the agreement. On A's construction there is no explanation as to why this should be the case, or why the clause should expressly refer to clause 2.6(A)(3), but not to clause 2.6(A)(1) and (2).
  44. Furthermore, the clause is not limited in time in the same way as disclosure of "Confidential Information". If the parties had wished to exclude pre-NDA discussions from the ambit of clause 3, there is a strong argument that they could and would have said so.
  45. In addition, clauses 4 and 5, which also are not limited to "Confidential Information", deal expressly with pre-NDA discussions. Therefore pre-NDA discussions were plainly in the contemplation of the parties when entering the NDA.
  46. The entire agreement clause at clause 5 is also of relevance, because it applies to pre-existing agreements concerning prior discussions.
  47. With those factors in mind, turning to clause 1.1(C), it seems to me that there is at least a strong argument that the reference to "knowledge of the fact the parties are or were" in discussions is intended to include both past and future discussions. That is the natural meaning of the language, and is supported by a consideration of the whole document, in light of the purpose of the NDA.
  48. This is not a case which I can resolve simply by looking at the contract in the absence of evidence as to the factual background. However, I have reached the conclusion that, at least on the information before me, S is more likely than not to succeed on its construction. Therefore, I consider that the first hurdle for interim relief is satisfied.
  49. I have considered whether it is appropriate, given that this is a negative obligation in a contract, simply to grant interim relief on that basis. However, I do not think that I ought to do that without consideration of the balance of convenience.
  50. In my view, if an interim injunction is not granted, there is a real risk that the Massachusetts court will have ruled on jurisdiction before a trial of these proceedings takes place. In other words, if I did not grant the injunction, that would be determinative of the trial. I think that there is a real risk that damages would not be an adequate remedy for S in those circumstances, since it would very difficult to quantify the prejudice (if any) that S would suffer from the Massachusetts court accepting jurisdiction, where it would not have done so, but for the disclosure which is (strongly arguably) prohibited by the NDA.
  51. I might have seen the picture differently if it were the case that S objected to any court in the United States hearing A's declaration on non-infringement. However, subject to questions as to whether or not the declaration is premature, S has made it clear that it cannot and does not object to the court in the Eastern District of Virginia, which is able to resolve patent disputes very rapidly, from hearing this case. In those circumstances, it is not the case that A is shut out from obtaining the relief that it seeks in the United States.
  52. As far as Massachusetts is concerned, there is no obvious explanation as to why A will be prejudiced if its case, wrongly, is not heard there, other than its (no doubt understandable) desire to obtain a home state advantage.
  53. Overall, I consider that, given the view I have reached as to the likely interpretation of the contract, it is appropriate to the grant interim relief sought by S.
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