Canada: It's Official: Federal Court Protective Orders Were Never Dead

In Federal Court Protective Orders – Back from the Dead?, three Federal Court decisions on protective orders were discussed – in two decisions, protective orders were granted, and in the other decision – Canadian National Railway Company v BNSF Railway Company – Justice Locke denied the parties a consent protective order.

In Canadian National Railway Company v BNSF Railway Company, the parties had prepared a joint draft protective order based on a Federal Court template developed over the years by the Federal Court IP Users' Committee. Justice Locke (as he then was) reviewed the consent protective order against the Supreme Court of Canada's Sierra Club of Canada v Canada confidentiality orders factors, and held a protective order was unnecessary because "reasonably alternative measures" (e.g., protective agreements, the implied undertaking rule) were available to the parties. As was noted in the above-mentioned article, that decision was appealed by Canadian National Railway.

The Federal Court of Appeal Weighs In

Before the Federal Court of Appeal, both Canadian National Railway and IPIC in its role as intervener on the appeal emphasized the appropriateness of protective orders in intellectual property litigation for many reasons, including that:

(i) parties to intellectual property litigation are often direct competitors, making the need to protect confidential and sensitive information greater in such disputes;
(ii) parties are often involved in cross-border litigation, particularly in the United States where the implied undertaking rule does not apply and protective orders take their place;
(iii) reciprocal issuance of protective orders is vital in U.S. cross-border disputes; and
(iv) protective orders provide legal certainty because there is no issue regarding their enforceability when issued by the Federal Court.

The Federal Court of Appeal observed of the Sierra Club decision that it was not about protective orders – rather, it related to a publication ban and the need to balance confidentiality against the public interest in open and accessible court proceedings.

The Sierra Club test for confidentiality orders requires that disclosure of confidential information would impose a serious risk on an important commercial interest, and that there not be reasonable alternatives to either the order itself or its terms. Different considerations bear, however, on matters involving evidence parties choose to tender (to which confidentiality orders may apply), and evidence parties are required to disclose, for example, during discovery (to which protective orders apply).

Necessity not required for Protective Orders

The Federal Court of Appeal concluded that while the Supreme Court in Sierra Club relied upon the protective order test from AB Hassle v Canada, it did so only in assessing the first part of the confidentiality order test – whether disclosure of confidential documents would impose a serious risk on an important commercial interest. It did not extend the protective order test to include a consideration of necessity, alternative measures, or the scope of the order to ensure it is not overly broad. Accordingly, the Federal Court of Appeal held the necessity element of the Sierra Club confidentiality order test cannot apply to protective orders.

The Federal Court of Appeal emphasized that the underlying interests in seeking protective orders versus confidentiality orders are vastly different. A protective order has no deleterious effects on the principle of open and public courts because it arises at the pre-trial discovery stage of a proceeding. The only point at which the "open court" principle may be engaged is when a case goes to trial and a party's documents or answers from discovery transcripts are introduced as part of the case at trial. In contrast, confidentiality orders are meant to circumvent the open court principle by preventing material from becoming part of the public record.

The Federal Court of Appeal ultimately concluded held that Justice Locke had erred in law by extending the necessity element of the confidentiality orders test to motions for protective orders. The Court also noted that hybrid orders (i.e., those that include both protective and confidentiality order provisions) are subject to the same test for protective orders, with the caveat that a party who wants to file documents confidentially with the Court must bring a motion pursuant to Rule 151 of the Federal Courts Rules either before or forthwith after filing the documents. Accordingly, Justice Locke's order was set aside and the consent protective order was granted with an amendment to add the Rule 151 motion requirement for a confidentiality order.

Going Forward

Parties seeking protective orders should ensure that the AB Hassle test is met, and that the protective order submitted to the Court is in accordance with the Federal Court's updated model order recently developed in cooperation with the Intellectual Property Bar. Parties should provide evidence in support of their motion for the order, and should identify the portions of their draft order that have been added to or removed from the model draft (e.g., by blackline).

Author's Note: The Canadian Bar Association Intellectual Property section and IPIC's Litigation committee have worked with the Federal Court to develop model protective, confidentiality, bifurcation and interim sealing orders, which are available to the public at https://www.fct-cf.gc.ca/en/pages/law-and-practice/notices under "Model Orders".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.