Concerned about departing employees who might have confidential
information about your business and clients? Or maybe you are the
ex-employee and you are unsure of where the line is drawn when
departing one job to start another.
In Plaza Consulting Inc. v. Grieve et
al , 2013 ONSC 5338 (CanLII), the court
addressed an injunction application by QA Consultants, a Canadian
company offering software testing and quality assurance services,
against former employees and consultants who started a competing
business. The court provides some guidance on how these matters are
held, when ex-employees are accused of misappropriating
confidential information and poaching customers. In this case, the
Whether dealing with employees who allegedly misappropriate
their former employer's business methods in breach of a
restrictive covenant or in breach of fiduciary duties, the employer
must at the very least establish that it "has a proprietary
interest that is entitled to protection." Aon Consulting
Inc. v Watson Wyatt & Co., 2005 CarswellOnt 3706, at para
16 (SCJ). Here, the cort concludes that the confidential
information in question is "highly generic". Remember
that "[a] trade secret cannot be within the realm of general
skills or knowledge."
A party who receives allegedly confidential information
and who is accused of misusing it must have done so to the
detriment of the party that provided the information in the first
place. International Corona Resources Ltd. v Lac Minerals
Ltd. 1989 CanLII 34 (SCC), (1989), 26 CPR (3d) 97, at
103(SCC). In this case, the court found that the information in
question was not used to the detriment of the plaintiff.
In the case of the allegations of solicitation of former
clients or employees of QA Consultants, the court indicated that,
in these agreements, the restrictive covenants were
sufficiently vague that the allegations made against the
ex-employees were not "clear" breaches of those
covenants. The vague definition in the agreements did not help the
case. Ultimately, the injunction application was dismissed.
Remember to get advice on the restrictive covenants in
employment agreements. Both employees, consultants and
employers should understand the scope of confidentiality
obligations and non-solicitation restrictions.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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