A key employee departs. The employer, worried that
confidential information has leaked out of the company, scrambles
to respond. After a frenzied period of preparation, the employer
starts a lawsuit and seeks an injunction against the
In these two recent Canadian cases, those same basic facts apply
but with very different results. First, let's look at the BC
case decided in December 2014 (JTT Electronics Ltd. v.
Farmer, 2014 BCSC 2413). In that case, the
employer sued the ex-employee and the employee countered with an
argument that the employer could not actually identify the
confidential info it sought to protect.
The Court agreed, noting: "The need to identify with some
reasonable degree of specificity what a plaintiff asserts is
confidential or proprietary serves three important and related
functions." To summarize:
It enables the ex-employee to respond to the lawsuit, and to
bring into question whether the purported confidential information
is actually confidential or whether it is information that is in
the public domain.
If the employer can establish that specific information in its
possession is confidential, and the remaining elements of an
injunction are made out, the ex-employee can understand (by virtue
of the court order) what it is that he or she can or cannot
Unless there is a "reasonable level of precision or
definition", it is difficult or impossible for the court to
enforce the order.
Because the employer could not describe the confidential
information with enough specificity and detail, the order was not
Next, the non-solicitation and non-competition clauses which
purportedly bound the ex-employee were, by the court's
analysis, "undefined", "ambiguous",
"overly broad", since they appeared to impose a worldwide
ban which imposed a "blanket prohibition of unlimited
geographic scope on any post-employment competition" by the
ex-employee. On that basis, the Court refused to grant an order to
enforce these restrictive covenants.
Lessons for business?
"Confidential information" is broadly understood to
be "anything that is valuable because it is secret to the
company." But in the case of an injunction application, courts
will require a clear, specific definition of what
exactly constitutes confidential information in this case,
as it relates to this company and this ex-employee. While the
definition in the underlying agreement - for example, a
confidentiality agreement, non-disclosure agreement, employment
agreement or even a shareholders agreement - is likely to remain
broad, the specificity must come into play at the point where the
court order is sought.
Ensure that non-competition restrictions are carefully drafted,
are reasonable in their scope, and consistently use defined terms.
For example, in this case, the defined term
"Business" was given a particular meaning in
one section, but the seemingly generic term "business"
was used in another section. This caused the court to
question why the two terms would be different, and
merely added to the court's finding of ambiguity.
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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