Case No. IP-2021-000073

88.I have found that Paddington is obliged to provide inspection only to the third party auditor and not to Pixdene (or its advisers), so I will limit my consideration to Issue 7(a). 89.Paddington seeks a declaration that it is “entitled to redact those parts of the said agreements and other business records which do not relate to the Claimant’s entitlement under the Agreement to a share of Paddington Bear Worldwide merchandising revenue”. It submits that this is linked to what it is that clause 5 permits the third party auditor to inspect. Since clause 5 only permits inspection of documents which are relevant for the purpose of verifying Paddington’s compliance with the RDA, it submits there is no entitlement to inspect other documents, and Paddington must be entitled to redact material which is not relevant for that purpose.90.It further submits that Paddington must be entitled to redact material which is legally privileged, and material which is confidential, whether to Paddington or to third parties with whom Paddington is dealing, save to the extent that it is required for the third party auditor to verify Paddington’s compliance.91.Paddington submits that assistance can be derived from CPR PD 51U which, for the purposes of disclosure in litigation, provides at paragraph 16.1 that a party “may redact a part or parts of a document on the ground that the redacted data comprises data that is - (1) irrelevant to any issue in the proceedings, and confidential; or (2) privileged…”.92.Pixdene’s position is that such a declaration should not be granted, as:i)The RDA does not provide for the redactions sought or redaction at allii)Redactions are likely to be further source of contention and cause additional costs, given the parties’ evident mistrust of each other. The declaration sought will provide more opportunity for satellite disputes;iii)Paddington has previously redacted documents liberally and without justification. What it seeks is very wide – that it is entitled to redact everything other than those parts which it considers relate to Pixdene’s entitlement under the RDA, and it has taken a very narrow view of that. It provides an example of Paddington redacting the details of work done in invoices charged to Copyrights, even though the invoices were deducted from Pixdene's entitlement to merchandising revenue. That meant that it could not be known whether the work done was properly attributable to merchandising revenue or to revenue other than merchandising revenue (such as revenue from books, tv and films) which should not have been charged to Pixdene.iv)There is no need for Paddington to be entitled to redact documents inspected by the auditor, who is a Chartered Accountant with professional obligations. To the extent they contain genuinely confidential information, Paddington is adequately protected by the law in relation to breach of confidence. Discussion and determination93.I accept Pixdene’s submission that the third party auditor will be a professional with professional obligations to treat confidential information confidentially. 94.I have also found that the third party auditor under clause 5 has only a limited disclosure right in relation to such information obtained from inspected documents: that it may disclose only such information gained from the inspection of documents as is necessary to report on the matters I set out in paragraph 56 above. That means that a copy of a document can only be disclosed by the auditor to Pixdene if and to the extent it is necessary to do so. This is a high threshold. It will usually only be necessary for the auditor to describe the document and summarise those parts of the document which relate to the question of whether Paddington has complied with its obligations under the RDA, not to copy the document itself.95.This should provide significant comfort to Paddington that clause 5 will do what the parties intended, which is in part to keep Pixdene away from Paddington’s documents.96.I have also found that Paddington is only obliged to provide for inspection under clause 5 its agreements and any other business records which are relevant to the calculation of merchandising royalties relating to Paddington Bear. 97.However, clause 5 is silent about redaction. I consider that, given the protections which have been put in place in the drafting of clause 5, including: providing the inspection right only to a third party auditor with professional obligations; and limiting what that auditor can report to verifying compliance by Paddington; it is neither obvious that the relevant agreements and business records disclosed for inspection by the auditor should be further redacted, nor is it necessary, save that I am satisfied it is both obvious and necessary in respect of legally privileged information. 98.In respect of confidential information, whether that information is confidential to Paddington or to a third party, if it is relevant to the question of Paddington’s compliance with the RDA then it is required to be disclosed for inspection to the third party auditor, otherwise the purpose of the inspection is undermined. The auditor may look at a single contract or report which deals with both merchandising royalties and film royalties, for example, but he is only able to disclose to Pixdene that which is necessary to report on Paddington’s compliance with the RDA i.e. relating to the calculation and payment of merchandising royalties. The risk that confidential information about film royalties will pass to Pixdene through the third party auditor is adequately mitigated by the auditor’s professional obligations including his obligations of confidentiality.99.For those reasons I am not satisfied that a right to redact should be implied save in respect of legally privileged information which Paddington is not obliged to make available for inspection. I will make a limited declaration accordingly.