In the course of conducting business, employees may be exposed to confidential information or trade secrets. Naturally, a business will want to do everything it can to protect such information. But, employees may also need that information to do their job, so it is often given to them. The problem to consider then is what happens if the employee leaves and takes that information with them to their new job. And, to make matters worse, that new job happens to be at a competitor? Such was the case in Cambridge Mercantile Corp. v. Cook, 2016 BCSC 11, a recent case from the Supreme Court of British Columbia.
Cambridge Mercantile Corp. v. Cook
In Cambridge Mercantile Corp. v. Cook, the defendant, Mr. Cook, worked with the plaintiff, Cambridge Mercantile Corp (Cambridge), from 2003 until July 2015. After resigning from Cambridge, he went to work for a competitor, EncoreFX. While Mr. Cook was employed by Cambridge, he was exposed to confidential and proprietary information, including key information about Cambridge’s customers. Before resigning, Mr. Cook went as far as emailing Cambridge’s customer information to his personal email account. Cambridge alleged that Mr. Cook was using their customer information at his new job with EncoreFX and was contacting Cambridge’s customers for business purposes. Cambridge therefore went on to sue Mr. Cook.
As a part of its legal proceeding, Cambridge brought an application for an interim injunction. Such applications are not a determination of the case on its merits. Meaning that the court was not yet tasked with determining the final outcome of the case. This application was just merely to stop Mr. Cook from continuing his actions in the meantime. Interim injunctions are often brought early on in a legal proceeding to stop a party from causing irreparable harm. Court proceedings can take some time for final resolution, so an early injunction may be justified in certain circumstances. Cambridge based its application on an employment agreement that Mr. Cook had entered into with Cambridge when he was employed there. The agreement had specific clauses that sought to limit Mr. Cook’s post employment conduct, including:
- a confidentiality clause that prevented Mr. Cook, during his term of employment and any time thereafter, from disclosing or using confidential information belonging to Cambridge, including customer lists; and
- a non-solicitation clause that, amongst other things, required Mr. Cook to not solicit business from any client or customer of Cambridge for a period of one year following Mr. Cook’s employment with Cambridge.
One of the important criteria for an interim injunction is whether the plaintiff will suffer irreparable harm in the absence of an injunction. In its reasons, the court indicated that, as far as confidential information is concerned, the following factors are important in determining whether the information is sufficiently confidential so as to warrant an injunction:
- the extent to which the information is known outside of the owner’s business
- the extent to which it is known by the employees and others involved in the owner’s business
- the extent of measures taken by the company to guard the secrecy of the information
- the value of the information to the company and its competitors
- the amount of money or effort expended by the company in developing the information
- the ease or difficulty with which the information could properly be acquired or duplicated by others
The court was satisfied in this case that irreparable harm would be caused against Cambridge and thus granted the injunction. Further, the evidence before the court supported Cambridge’s assertion that Mr. Cook had taken their customer information and was using it at his new job with EncoreFX to contact Cambridge’s customers.
In granting the injunction to Cambridge, the court ordered, amongst other things, that Mr. Cook:
- stop disclosing or using Cambridge’s confidential information, including customer information;
- immediately return any of Cambridge’s confidential information in Mr. Cook’s possession; and
- stop directly or indirectly soliciting business from any of Cambridge’s customers with whom Mr. Cook had dealings during his employment with Cambridge.
In its reason for making that order, the court considered an interesting argument made regarding the public interest. The argument was that Cambridge cannot “own” certain customers and that customers should be free to decide if they want to follow an employee after developing trust with him or her. The court’s response to this was as follows:
“…it is certainly true, as a general proposition, that the plaintiff’s customers are and should be free to follow the defendant to EncoreFX in circumstances where they have made the choice on their own, without inducement or encouragement by the defendant. The defendant says this has not happened, but there is a body of evidence that casts doubt of those assertions.”
If you are facing an issue relating to confidential information or an employment matter, contact one of our litigators in Dispute Resolution.
This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.