When a former employee misuses a company database, employers should consider every legal option, a case confirms
The case Pintorex Ltd v Keyvanfar is a useful reminder of the parameters of confidential information. It concerns a familiar scenario where a trusted employee leaves the business, taking with him confidential information, only to misuse that information for the benefit of a competitor.
Facts
Pintorex was a stationery business. Keyvanfar had been an employee of the business for over 15 years. He decided to leave and set up in competition together with a friend who would provide the financial support. Pintorex alleged that Keyvanfar, on the last day of his employment, downloaded and removed the entire commercial database, containing client details and price sensitive information, from the company. The database was downloaded on to a laptop owned by Keyvanfar’s new employer, which then used the pricing information it contained to approach two of Pintorex's clients, undercutting the company’s prices.
The company pursued a wide range of actions against Keyvanfar, his new employer and the financial backer. These were eventually narrowed down to a breach of the duty of good faith (owed by Keyvanfar to his former employer), the misuse of confidential information, and the question of whether Keyvanfar’s new employer and/or his financial backer could be held vicariously liable for his actions.
County court
The court held that the information Keyvanfar had taken from his former employer was confidential and that he had misused it. It also held that the new employer was liable for Keyvanfar’s breaches of confidence, including those pre-dating his employment with the new company. This was on the basis that he was acting as the new employer's agent to further its interests, and that the new employer had sufficient knowledge of what was going on to be jointly liable with him. It was held that the financial backer did not know what was going on and so could not be jointly liable.
Interestingly, the case also considered whether the new employer could base its defence on a conversation it had with Pintorex prior to the company issuing proceedings. It was alleged that during this conversation Pintorex had agreed not to pursue any action against it. The court did not uphold this argument based on the evidence before it, but it does leave open the possibility of this type of defence succeeding where the facts support it.
Comment
This case will provide employers with further comfort when faced with a situation where a former employee is believed to have taken confidential information or trade secrets although, given the obvious misconduct involved, the decision is perhaps not surprising. The case does highlight the importance of understanding the mind set of third parties alleged to have been involved in the misuse of confidential information when trying to establish liability for that misuse. And the case is also a timely reminder not to waive any claims against potential defendants until you have established the facts and considered all causes of action available.
Andrew Haywood is a senior associate at Penningtons.
For more employment law
articles, visit HR-inform.
