Public Hearing and Trade Secrets

Public Hearing and Trade Secrets

December 7, 2016
The public nature of the legal process is part of the foundations of the legal system practiced in Israel.  However, sometimes the publicity may cause damage to a party and the mere threat of public proceeding may constitute a real risk that may induce payment. In other cases, one of the parties may want the publicity in order to clear his name after it was jeopardized. In addition, sometimes the public nature of the procedure may deter a party from filing certain materials in order to prevent exposure of trade secrets.
The Israeli Judiciary Basic Law anchors the principle of the public nature of the legal process and the Israeli Courts Act stipulates accordingly that the Court shall sit in public. However, if required, at a certain closed list of cases the Court may discuss the case behind closed doors.
In a case recently discussed at the National Labor Court an employee filed a lawsuit against the employer, a commercial company. At the same time, the company filed a counterclaim for various grounds, including breach of contract and misappropriation of trade secrets. After a judgment was given in favor of the employee the employee discovered that the holding clearing his name was not published. The Court held that the company did not raise the burden of proof to show that it was one of the exceptional cases justifying a gag order and therefore ordered the publication of the verdict and the names of the litigants. The Court also rejected the company's argument that had it known that the verdict will be published it would have chosen a different strategy in managing the case in order to prevent trade secrets being published.  The Court held that the strategy chosen did not reveal any trade secrets and regardless, caselaw teaches that false expectations of non-disclosure does not constitute grounds for a gag order.
Sometimes, in order to manage a claim, a company is required to disclose materials that constitute trade secrets. In such cases, the Court may order a closed-quarters hearing.  However, is not always possible to anticipate the Court's decision in such a motion. Therefore, when managing a claim that requires disclosure of confidential material one need to take into account the risk of exposure in case that a motion to hear the case in closed quarters is rejected.  For example, in a case where a client of our firm filed for cancellation of a tender winning, upon discovering that it is not possible to receive a cease and desist order to prevent the consummation of the winning,  the client decided to withdraw the lawsuit rather than bring it to a path of monetary claim in respect of damages, just to avoid having to disclose pricing data - confidential information of the client.
Moreover, proceedings relating to privacy or defamation are public procedures and without a decision on closed-quarters hearing the plaintiff might find itself in a position that it won the case but caused a larger dissemination of the defaming or private data.
In conclusion, the public nature of proceedings is likely to be an important consideration in the management of legal proceedings, whether as plaintiff or defendant, and should be considered carefully as part of the strategic planning of the case.