Protecting confidential information and IP with search and seizure orders – who inspects seized documents first?
26 September 2019
One tool in the armoury of any business that suspects its confidential information has been stolen and/or its intellectual property infringed is the “search and seizure order” (“SSO”) – a court order authorising a claimant’s lawyers to enter an opponent’s premises to search for, copy, remove and detain documents relevant to the alleged wrongdoing. In a joint judgment handed down just before the summer recess, the High Court has clarified the circumstances in which a claimant who is granted an SSO will be allowed to inspect seized material before the defendant does.
Searching for and inspecting documents in a “conventional” High Court case
Typically in High Court proceedings, the process of searching for and inspecting relevant documents happens at the disclosure stage. The parties search their own documents and disclose (by list) any relevant ones to their opponent, who may then inspect any documents which are not privileged. The disclosure and inspection process usually takes place some way into proceedings – after the claim has been issued, the defence filed and a case management conference held (though under the disclosure pilot scheme currently running in most Business and Property Courts, initial disclosure of key documents is usually required earlier, when filing statements of case).
Searching for documents under a search and seizure order
The position is somewhat different where the court makes an SSO. Although a claimant can apply for an SSO at any point in proceedings, usually it will do so urgently and without notice before any claim has even been filed. The order is used to secure evidence in the control of a potential defendant and should be made without delay. If the SSO is granted, usually the claimant’s legal team will carry out a search of the defendant’s premises for the material in question (albeit with certain safeguards).
One of the benefits when an SSO is executed is that the claimant will obtain a copy of the evidence held by the defendant much earlier than it would via the disclosure process. The High Court has now clarified whether and in what circumstances a claimant will be allowed to review documents preserved by digital imaging pursuant to an SSO before the defendant does.
Background to the joined cases – why seize documents early?
The joined cases of A v B and Hewlett Packard Enterprise Company v Manchester Technology  EWHC 2089 (Ch) arose in slightly different contexts.
The first case, A v B, was an action for breach of confidence. It was alleged the individual defendants had acquired and misused the claimants’ confidential information for the material benefit of a competing business.
The second case involved an intellectual property infringement claim brought by Hewlett Packard Enterprise Company, Schneider Electric and others (together, “HPE”) against various companies that supply IT hardware. HPE claimed that the defendants had been dishonestly selling parallel imports, counterfeit goods or goods which were originally sold by HPE on the basis that they would be sold to specific end users and not for resale and/or into a different part of the market. HPE successfully applied for an SSO to see the defendants’ documentation in order to properly assess the extent of the proposed claim and whether HPE had any cause of action against others in the supply chain.
Inspecting seized documents – who goes first?
In both cases, the court granted the claimants an SSO providing for images to be taken of the defendants’ digital devices and for the claimants’ solicitors to carry out first inspection of the images. The defendants in each case raised a similar point of objection on the scope of the SSO: inspection had been ordered the wrong way round – the defendants (not the claimants) should be entitled to review the seized material first.
Mannn J concluded that SSOs were developed to preserve documents that would have otherwise been disclosable as part of the disclosure process: “the exercise is usually intended to be a preservation one, not (at that stage) a disclosure one”.
Although SSOs were developed in the context of physical documents, Mann J held that this historical background informs what should normally be done with imaged digital data once seized: once the image is taken, the documents are safe from the risk of destruction and the purpose of the SSO is met. Therefore, he concluded, there is no justification for a search of those documents being, as a general rule, carried out by the claimant and/or at the seizure stage – an SSO is “not a jurisdiction to give the claimants a form of disclosure exercise which is (a) early and (b) a do-it-yourself form of exercise which would normally be done as part of standard disclosure.”
What does a claimant have to do to be allowed to inspect seized documents first?
Judge agreed with the defendants that any inspection of documents on the digital images detained at the SSO stage by the claimants needed “to be justified as a separate exercise” and analysed in terms of the disclosure jurisdiction. Any decision to allow disclosure which is (a) early and (b) to be carried out on the defendant’s material by the claimant must be dealt with taking into account the particular facts of the case with many factors in play, including:
- a strong prima facie case of the defendant’s dishonesty and propensity to cover tracks by destroying evidence (this may be ameliorated by the defendant’s solicitors being involved);
- if some important documents may be honestly missed by the defendant’s solicitors;
- applying search terms to narrow the field of the class of documents for review;
- if the claimant has greater resources so it makes practical sense to allow it to look; and
- on the flipside, that the whole exercise is a “highly intrusive one” and these kinds of digital image are likely to contain private and confidential material which should not (if avoidable) be seen by the claimant at all.
The outcome: success for the claimants
Applying the above principles, Mann J concluded that both sets of claimants should be allowed to review the imaged material themselves at that early stage of proceedings, subject to certain constraints. In both cases, relevant factors taken into account (among others) included:
- the parties proposed to limit the cohort of documents for review by keyword searches;
- the claimants were better placed than the defendants and their solicitors to identify relevant documents (i.e. relating to the claimants’ confidential information and any misuse of it in A v B and illicit goods in the HPE case); and
- the claimants had established a sufficiently strong case on liability to get an SSO in the first place (and in A v B there were serious questions about the defendants’ (lack of) compliance with the original order).
Being able to inspect documents seized under an SSO is an important tool for claimants to see their proposed opponent’s documents early in order to properly scope out what claims it may have (and against whom).
The High Court has been clear that it is not inevitable that claimant-led inspection in the early stages of litigation will be permissible in every SSO case, even though both sets of claimants succeeded in these cases. However, the Court has helpfully set out a menu of factors for claimants to consider when applying for first and early inspection of seized material – and indeed for any defendant wishing to resist.