“CONFIDENTIALITY CLUBS AND FRAND COMPLIANCE: INSIGHTS FROM THE NOKIA-ASUSTEK JUDGMENT”

INTRODUCTION

The entire dispute in Nokia v. Asustek unfolds around Standard Essential Patents (SEPs) patents that are mandatory to use if a company wants to follow certain technical standards, such as video codecs or communication technologies. Whenever companies own SEPs, they must offer licenses on FRAND terms Fair, Reasonable, and Non-Discriminatory. But how does an implementer know if the offered licence is truly FRAND? The answer lies in comparable licenses previous licence agreements that the SEP holder has signed with other companies. These comparators help the implementer and the court check whether the proposed rates and terms are actually fair. This is where the story really begins: Nokia wanted to show its licence terms were FRAND, but the comparable licenses contained highly confidential commercial information. So, Nokia approached the court to set up a Confidentiality Club (CC) a protected space in which sensitive documents could be shown to only a few authorized people.

WHAT ARE CONFIDENTIALITY CLUBS?

Confidentiality clubs sometimes referred to as “access clubs” allow multiple licensees or potential licensees of Standard Essential Patents (SEPs) to access sensitive patent information while preventing competitive misuse. These arrangements aim to protect proprietary information while still enabling meaningful discussions around licensing terms. Essentially, they serve as a safeguard: participants gain enough data to negotiate fairly without compromising competitive advantage.

WHAT IS THE CASE ABOUT?

In the case of Nokia Technologies Oy (the Standard Essential Patents holder) vs Asustek Computer Inc. & Ors, the facts are broadly as follows:

• Nokia sued the defendants for alleged infringement of certain Indian patents (IN 424507 and IN 338105) which relate to HEVC/H.265 video codec technology. 
• Nokia also proposed submitting to the court and to the defendants’ side certain comparable licence it had with third parties (i.e., licence Nokia had made with other implementers) in support of its FRAND compliance case. 
• Because these licenses contain very commercially sensitive information (royalty rates, structures, business terms, licensee identities) Nokia sought to set up a “Confidentiality Club” (CC) under relevant rules (Rule 11 of the Delhi High Court Rules Governing Patent Suits, 2022, plus Chapter VII, Rule 17 of the Original Side Rules) so only limited persons would have access to the materials. Rule 11 empowers the court to protect sensitive technical and commercial information disclosed during proceedings by restricting its inspection or circulation. It allows the court to designate specific individuals, such as lawyers or experts, who can access such documents only after giving undertakings of confidentiality. Chapter VII, Rule 17 provides the procedural framework for forming and managing a Confidentiality Club, defining who can view the documents, under what conditions, and for what purpose.
• The defendants objected to certain restrictions Nokia sought as part of the club: for example, Nokia wanted to impose a two-year “limited-licensing restriction” on in-house representatives of the defendants (i.e., after inspection of the licence they could not engage in licensing negotiations with third parties for two years). Nokia also sought to exclude in-house representatives entirely (or limit them). Nokia also sought to redact parts of the comparable licence. The defendants opposed these. 
• The Court delivered an order setting out how the Confidentiality Club will be constituted, what restrictions apply (and what do not), and importantly directed that Nokia must disclose all comparable licence (not just a selected subset) to the Confidentiality Club. 

KEY POINTS OF THE COURT’S DECISION:

1. Composition of the Confidentiality Club (CC):

The Court allowed the CC to include defendants’ legal counsels, experts, consultants, and in-house representatives, rejecting Nokia’s attempt to exclude or heavily limit in-house personnel. Importantly, the in-house representatives in India must match those in corresponding foreign proceedings to prevent unnecessary information leakage. The Court noted Nokia had allowed such access in other jurisdictions, making its restrictive stance in India inconsistent. This ensures implementers can meaningfully assess the FRAND licence offer.

     2. Reduction of Confidential Documents:

Nokia may submit redacted versions of licence agreements, but only for genuinely confidential portions not material to FRAND determination. Full, non-redacted versions must be filed in sealed cover for CC members’ inspection, with in-house representatives accessing redacted portions only if material. Redacted sections cannot be later used by Nokia in this case. These balances protect sensitive commercial information with enabling the implementer to assess the FRAND rate reliably.

    3. Disclosure of All Comparable Licence:

Nokia must provide all comparable licence expired, current, lump-sum, or running-royalty. Cherry-picking is not allowed, as access to all data is necessary for meaningful evaluation and benchmarking of the FRAND offer. This improves fairness and transparency.

    4. Restriction on Licensing Activity by In-House Representatives:

The Court rejected Nokia’s proposed two-year bar on in-house personnel negotiating with third parties, as no actual risk was shown and foreign proceedings imposed no such restriction. Prior notice to third-party licensees is required, preserving implementers’ ability to analyses licence without undue restrictions.

WHY THESE DIRECTIONS MATTER: THE FRAND AND COMPARABLE LICENCE LINK:

The concept of FRAND (Fair, Reasonable and Non-Discriminatory) is central to Standard Essential Patents licensing. One of the key tools for assessing whether an offered royalty rate is FRAND is examining comparable licence agreements i.e., agreements between the Standard Essential Patents holder and other licenses under similar circumstances (similar products, geography, market power, etc.). Without access to such comparators, it is difficult for a potential licensee (or court) to determine whether the rate offered is indeed fair and reasonable. But at the same time, Standard Essential Patents holders have legitimate concerns about confidentiality: comparable licence agreements often contain commercially sensitive terms, pricing, royalty rates, market thresholds, etc., and disclosure to a competitor (or potential competitor) may harm their business. This tension lies at the heart of confidentiality club orders.

In the Nokia v ASUSTEK case, the Court attempted to strike a balance by:

• Allowing the Confidentiality Club so as to enable access to comparable licences while limiting dissemination;
• Allowing redaction of truly confidential material;
• Ensuring all comparators are disclosed to avoid selective cherry-picking; and
• Rejecting overbroad restrictions (like a blanket post-disclosure licensing bar) that unduly burden the Defendants.

CONCLUDING THOUGHTS

The Delhi High Court’s order in the Nokia vs Asustek case marks a careful attempt to walk the tightrope between:

• protecting commercially sensitive licence agreements (for Standard Essential Patents holders and their licensees), and
• ensuring fairness and meaningful access for implementers so that the FRAND undertaking has value.

By insisting on full disclosure of comparable licences, permitting in-house representatives (while putting in safeguards), and limiting redaction only to non-rate‐relevant elements, the Court has strengthened the transparency side of the coin. At the same time, by rejecting a blanket ban on negotiation by in-house reps (so long as third-party licences are informed), the Court recognised the practical realities of licensing negotiations.

For practitioners in India (and globally), this judgment reinforces that mere invocation of “confidentiality” will not suffice; the real test is whether the implementer has sufficient access to evaluate whether the royalty and terms are indeed fair, reasonable and non‐discriminatory.