Telstra loses big in keeping its information confidential in Australian patent dispute

The AmeriKat is looking forward to  her first
sojourn to Australia

The AmeriKat has yet to set a paw in Australia.  This makes her unique amongst most of her English peers, almost all whom have taken the long series of flights to experience the gorgeous sandy beaches, unrivalled scary insects and snakes and Neighbours nostalgia.  However, despite the fact that we are so far away, Australia's legal system seems very familiar to the English having derived from our common law system.  But how similar are we when it comes to protecting confidential information in court proceedings?  Martin O’Connor (Addisons) reports on the recent case of Upaid Systems Ltd v Telstra Corporation Limited (No 4) [2016] FCA 1514 where the Federal Court of Australia recently grappled with the issue.  Martin reports:

"The long running patent dispute between technology company, Upaid Systems Ltd and major Australian telco Telstra Corporation Limited reached a key inflexion point recently with the Full Court of the Federal Court of Australia rejecting Telstra’s attempts to have the matter summarily dismissed. In a follow up decision several weeks later, the Federal Court dismissed an application by Telstra to have large tracts of information which had been provided in connection with its summary dismissal application suppressed from public access.

Given issues relating to the suppression of material are not frequently canvassed by the Court—they are usually resolved directly between the parties—the decision provides a rare and interesting insight into the Court’s views on suppression issues generally. This is particularly important given that a defendant in a patent infringement proceeding may be required or may choose to disclose information they would prefer to keep confidential.

Background – re-cap

Upaid Systems Ltd is a technology company founded in 1997 and has an international portfolio of patents over certain enabling technology for mobile commerce. In Australia, Upaid is pursuing legal action in the Federal Court against Telstra, alleging that Telstra has infringed two of Upaid's Australian patents, through the use of a convergent communications system and an enhanced services platform to provide a range of products and services to users connected to Telstra's mobile telecommunications networks.

The Suppression order decision

One of the fundamental principles of litigation in Australia is that the Court conducts its business in public and that any documents which are read in open court form part of the public record. The Court may, however, in limited cases make orders to suppress information where it is necessary.

Telstra sought suppression orders over vast swathes of information, including: evidence filed in relation to its summary dismissal application; parts of the transcript of the hearings at which the contents of the evidence was freely disclosed and discussed; written submissions; and an outline of evidence and flowchart describing the process of purchasing a particular Telstra product using an internet browser on a Telstra mobile device.

In the course of the proceedings the scope of what Telstra sought to supress changed and was inconsistently applied so that materials earlier revealed were later sought to be included. Telstra’s application was also haphazard. Words or data redacted in one submission were left open to view in others.

Significantly, Telstra had made no attempts to request that the Court be closed for the relevant hearings during which the above materials were canvassed, meaning that members of the public were allowed to and did attend the hearing. In fact, explicit disclosure was made in open court of information recorded in some of the documents, including references to names of system components and functions that form part of Telstra's telecommunications network.

Following the hearing of its summary dismissal application, Telstra later claimed the material contained information of a kind that could be used by 'miscreants' for the purposes of damaging Telstra or third parties in the form of a cyber-threat. As a result, it applied for a suppression order over the material on the basis that it was necessary to prevent prejudice to the proper administration of justice. This ground is commonly relied upon as a generic rationale when a litigant is unable or unwilling to be more precise.

The Federal Court refused Telstra's application for a suppression order. Justice Yates found that Telstra's disclosure in open court of what was claimed to be sensitive information was a decision Telstra had taken deliberately. The manner in which the purported confidential information was managed within the Telstra organisation was also prominent in the Judge’s thinking as he reached his conclusion:

“…Telstra has not demonstrated that the information it seeks to supress is confidential and treated as such by its employees, suppliers, contractors and consultants…there is no evidence that Telstra’s employees, suppliers, contractors and consultants, involved with the systems in question, are or have been under any obligation whatsoever not to disclose the actual information that happens to be contained in the outline, flowchart and affidavits."

In summary, in circumstances where Telstra had not shown it treated its information as confidential, it was too late for it to ask the Court to suppress that information:

“If there is no evidence that Telstra itself has a system or arrangement in place to protect the alleged confidentiality of the information in question, why should the Court be prevailed upon to put such a system in place or make such an arrangement for the purposes of this proceeding? Why is a suppression order necessary when Telstra itself does not appear to recognise, through its own procedures, the same necessity? The security concerns it has advanced in this application appear to be security concerns it tolerates and manages in its own commercial activities.”

Justice Yates was not satisfied that the suppression order sought was necessary to prevent prejudice to the proper administration of justice, other than in respect of 3 exhibits tendered at the hearing of the summary dismissal application, the confidentiality of which was not contested by Upaid:

“As the High Court emphasised in Hogan v Australian Crime Commission (2010) 240 CLR 651; [2010] HCA 21 at [31], it is insufficient that the making or continuation of such an order might be convenient, reasonable or sensible or be seen to serve some notion of the public interest. The question is whether such an order is "necessary" and, as the High Court emphasised, "necessary", in this context, is a "strong word". If the Court is of the view that such an order is "necessary", the order should be made. Otherwise, the order should not be made. If an order has been made and the circumstances show that it is not, or is no longer, "necessary" then that order should be discharged.”

Telstra's application concerned a hearing which took place in March 2015; the application for a suppression order was heard in November 2015; and a decision was made on the suppression order December 2016.

Finally, the Court took the view that Telstra should pay Upaid its costs in relation to the application."

The emphasis on the treatment of the confidential information by the party seeking to assert confidence and the necessity of the order are all points that are similarly pressed by parties seeking to protect confidential information before the English courts.  Also important is the speed with which you act to protect the information.  In this case months passed before the hearing and the application for the suppression order, which always raises a judicial eyebrow (or two).  Speed, like much of life, is of the essence.  Unless, of course, you are like Merpel and consider time a mere construct...