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Springboard protection

Posted on 16th January 2012
Case law

This case summary shows how employers can protect their confidential information and trade secrets by the use of injunctions.

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Simon Quantrill Simon
Quantrill
Managing Partner Telephone: 01473 688100

by their co-ordinated defection and by their past and present misuse of confidential information, all three defendants had given or would give Topsoe an unfair competitive advantage from which they would benefit if not restrained

Clear Edge UK v Elliott

Do injunctions work?

Employers often wonder if the restrictive covenants contained in an employee's contract of employment are ever enforceable and employers also wonder if they have any means of protecting confidential information and trade secrets when they do not have any enforceable restrictive covenants included in their contracts of employment. In this case the High Court granted the company the protection of a springboard injunction against three former senior employees who had resigned in order to join one of the company's main competitors.

The benefit of the springboard injunction was that it prevented all three former employees from making use of the confidential information and trade secrets which they had taken from the company and it effectively stopped them from going to start work for the competitor.

The company has the benefit of the springboard injunction until the outcome of the "speedy trial" which apparently started on this Monday, 16 January 2012!

The facts

The facts of this case concern a company that is a market leader in the design, manufacturing and sale of industrial process filtration products. The company uses specialist suppliers from a company called Haldor Topsoe AS ('Topsoe'). It would take the company some time to find an alternative provider to Topsoe.

All three ex-employees were defendants in this High Court action. All had been employed by the company for 20 or more years. Between them they dealt with the business development, product management and technical aspects of the key product range of the company. All three usually worked from home and had access to highly confidential information about the technical and financial aspects of the business and its customers.

In early 2011, the company rejected an approach from Topsoe to buy part of its product range. Then on 15, 16, and 19 September 2011 the defendants each resigned by email and advised they intended to join Topsoe.

The company, after the resignations, requested the return of its property including laptops and mobile telephones. On 20 September 2011 an employee sent to collect these items found the three defendants at one of the employee's house.

Suspicious that all three defendants were about to act in breach of their duty of fidelity owed to the company, including the misuse of confidential information and trade secrets, the company requested a warranty from each defendant that they had not disclosed confidential information to Topsoe and also requested that each provide undertakings not to engage in any competitive activity or breach duties of fidelity prior to their termination of employment and give undertakings to comply with the contractual post-termination restrictive covenants set out in their contracts of employment. The defendants offered only promises that they intended to comply with the confidentiality provisions in their contracts.

The company, therefore, decided to issue applications for 'injunctive relief' to prevent the defendants from commencing employment with Topsoe before 15 March 2012.

At the High Court

At the High Court the injunctive relief to prevent the defendants from joining Topsoe pending the speedy trial listed for 16 January 2012 was granted. The company had shown a prima facae case that by their co-ordinated defection and by their past and present misuse of confidential information, all three defendants had given or would give Topsoe an unfair competitive advantage from which they would benefit if not restrained.

The High Court took into account the following factors:

  • There was evidence to show that over a period of months all three defendants had carried out a co-ordinated departure which they had concealed from the company. This amounted to a serious breach of the duty of fidelity.
  • An email recovered from one of the defendant's laptop showed that he was negotiating for all three defendants and had been for some while.
  • Other evidence tended to suggest that the three defendants had even contemplated a defection and setting up a rival business.
  • All three defendants were senior employees who had access to highly confidential information which was subject to express restrictions, which they sought to ignore or breach.
  • The defendants' roles included handling all aspects of the business relationship with Topsoe.
  • There was evidence that all three defendants had breached their fiduciary duties by copying and retaining confidential information during their employment and, unless stopped, there was a real risk that they would in the future breach their duties of fidelity in relation to the misuse of such confidential information.
  • The defendants appear to have deliberately deleted the contents of their laptops by using a special data cleansing software package.
  • One defendant had also destroyed memory sticks and another had shredded files containing confidential information. Another defendant had torn out a significant number of pages from his diary, claiming these related to personal matters.
  • The court also took into account the fact that all three defendants argued they were free, unless restrained, to use the information either because it was not confidential or because they carried it in their heads.
  • Finally, the defendants had refused to provide undertakings and had falsely suggested that Topsoe would not be a competitor to the company.

Comment

The High Court rightly found in favour of the employer. All three defendants had arguably acted in breach of their fiduciary duties as well as duties of fidelity. The case illustrates how taking steps such as wiping laptops and shredding documents can look suspicious when considered with all the other evidence in the case. From a practical point of view this case provides reassurance to employers and illustrates the importance of ensuring that pre-litigation correspondence can be very helpful in persuading the court to grant injunctive relief, especially when requested warranties and undertakings are unreasonably not given by the defendants.

Don't delay in getting advice

If your business needs advice on how to react to a departing employee or is worried that confidential information (or trade secrets) are being misused please contact Simon Quantrill or Julie Temple for a no obligation discussion on your options and how Quantrills can help. Time is always of the essence, as any unexplained or unreasonable can mean the ability to get injunctive relief is harmed, or even lost.

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