Public Courts and Commercial Secrets: A Balancing Act

Originally published in the Commercial Litigation Review, Volume 8, Number 3.

This article explains the different types of orders available to protect commercial secrets, and sets out the appropriate test and limitations of each providing valuable insight for all litigators, and those who face litigation.

Commercial parties involved in civil litigation are often concerned about the possibility that confidential and commercially sensitive information will become public, damaging their commercial interests. There is an inherent tension between the need to protect commercial secrets during civil litigation and our open court system. The Ontario Courts of Justice Act [CJA], R.S.O. 1990, c. C.43, and Rules provide some protection, but it is not automatic and can be difficult to obtain.

The only automatic restriction on the use of material obtained in civil litigation is the deemed undertaking that applies to documents and other information received in the mandatory discovery process. Though helpful, this undertaking is very limited in scope. It does not fully protect confidential information. For effective protection, a party must go to the court for specific orders, including confidentiality orders (also known as "protective orders"), sealing orders and orders that all or part of a hearing be held in private.1 When deciding whether to give these orders the court is tasked with balancing the competing interests of the public (and its right to an open court process) and the commercial litigant (and the importance to it of maintaining confidentiality over its commercially sensitive information).2

Parties may also choose to opt out of the court system entirely to avoid public disclosure problems. Confidentiality is one of the main reasons why commercial parties agree to private dispute resolution — mainly arbitration — though limits remain on the extent of confidentiality, even in that regime.

The various routes to protection of confidential information are discussed below.

The Deemed Undertaking Rule and Its Limitations

The deemed undertaking rule3 limits the use that an opposing party can make of the documents and information obtained through the mandatory discovery process in civil litigation.4 It applies only to the parties to the litigation. They are deemed to have undertaken not to use material obtained from the discovery of the other parties for any purpose other than conducting that litigation. For example, a party cannot use the other side's discovery information to write a book or start a new business.

The deemed undertaking rule applies to documents or information that a party is compelled to produce in the course of civil litigation. As noted by the Ontario Court of Appeal, forced disclosure can compromise a litigant's legitimate interest in maintaining the confidentiality of documents and information.5 While interference with that privacy interest is justified as essential to a fair and accurate resolution of the litigation, a litigant who is compelled by law to produce documents for the purpose of a particular proceeding should not be in peril of having those documents used by the opposite party for some other purpose.6

Although the deemed undertaking provides some protection, it is limited. For example, it does not apply to discovery material that is filed with the court. A simple discovery motion may mean that considerable material becomes available to the public. Significantly, the deemed undertaking applies only to pretrial procedures. It does not restrict the use of the documents and other information at trial, where there is no automatic protection for confidential information.7 The deemed undertaking does not, therefore, fully protect commercial confidential information. Other steps are required.

Confidentiality Orders

There are at least two jurisdictional bases on which a civil litigant may apply for protection for its confidential information in an Ontario court:

Section 137(2) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which permits a court to order that any document in a civil proceeding be treated as confidential, be sealed and not form part of the public record; and Rule 30.11, which permits a court to order that a relevant document be "deposited for safe keeping" with the registrar and not be inspected by anyone except with leave of the court. The same principles are applied when using either basis, and they are often referred to in cases without distinguishing between them.8

Further, confidentiality orders are not necessarily tied to either s. 137(2) or Rule 30.11. The inherent jurisdiction of a superior court to control its own process provides the authority for a wide range of creative and differing orders where protection is deemed necessary.9

Orders protecting material filed in court are an exception to the open court principle, which the Supreme Court of Canada has found to be inextricably linked to freedom of expression and which has been called "the very soul of...